KGI 2026 Mid-Year Global Market Outlook: Beyond the Mist, First Light Appears

KGI released its 2026 Mid-Year Global Market Outlook on June 9, analyzing trends in the US, Mainland China, Hong Kong, and Taiwan. The US economy is expected to grow at 2.2% in 2026, driven by AI investment rather than consumer spending, despite elevated oil prices from US-Iran tensions. The Federal Reserve is holding rates steady, though yields may exceed 4.8%, while US stock markets show strong earnings growth near 20% YoY due to AI-related capex. In China and Hong Kong, structural transitions and resilient high-tech exports are supporting growth, despite weak domestic demand and property sector struggles. Japan’s economy faces softening domestic demand but benefits from semiconductor-driven external demand, while inflation remains unstable. The eurozone struggles with energy price pressures and tightening credit conditions. KGI’s 'LEAD' strategy—liquidity shifts, earnings focus, credit allocation, and diversified assets—aims to help investors navigate fragmented markets. James Wey, Head of International Wealth Management, noted that passive cash positions are insufficient in this environment, requiring active portfolio adjustments. The firm expects US Treasury yields to rise, potentially pressuring the Fed to act if inflation or wage growth resurge. AI-driven productivity gains are boosting US fundamentals beyond tech sectors, while China’s global AI investments mitigate slowdown risks. The outlook highlights macroeconomic realignment, with valuations in China-Hong Kong equities at historically low levels, signaling potential market realignment.