SCB CIO anticipates that monetary policy will likely lead to a decrease in investments during the first quarter of 2026 as policies begin to normalize. It is expected that major central banks such as the Fed, ECB, and BoJ will not adjust interest rates in the first quarter, making the investment landscape primarily dependent on fiscal policy. Increased market volatility is anticipated due to daily economic data releases. Additionally, geopolitical tensions are playing a growing role in shaping the global economy and financial markets. Investors are advised to plan for these circumstances. SCB CIO believes that the conflict between the U.S. and Venezuela will have a limited impact on the economy, inflation, and global oil prices if the situation does not escalate. The outlook remains positive for risk assets, particularly in U.S. equities focused on AI, while selectively investing in emerging markets (EM), especially those benefiting from the AI supply chain. Recommendations include investing in U.S. government bonds, high-quality short-term corporate bonds, and REITs to generate cash flow, along with gold investments to hedge against economic uncertainty and rising geopolitical tensions. For those with moderate to high risk tolerance, it is suggested to enhance portfolios with U.S. and Chinese technology funds, semiconductor stocks, sustainable energy, and healthcare sectors.

Mr. Sorachai Sunetta, CFA, Deputy Managing Director of Wealth & Investment Product at Siam Commercial Bank, revealed that SCB CIO exchanged investment views with BlackRock, a global investment expert. It is assessed that in 2026, the policy interest rates of major countries will begin to normalize more significantly, as the trend of rate cuts has passed its peak in 2025. This will result in a reduced impact of monetary policy on investments compared to 2025. The market expects the Federal Reserve to cut interest rates twice in 2026, bringing them to approximately 3.00-3.25%, while the ECB is expected to maintain rates at 2%. The BoJ may raise its policy rate from 0.75% to 1% within 2026. The market anticipates that the Fed, ECB, and BoJ will not change their policy rates in the first quarter of this year, leading investors to focus more on other factors, particularly fiscal policy and economic data.

Fiscal policy is increasingly influencing market direction, with budget deficits relative to GDP in various countries during 2022-2025 being higher than pre-COVID levels and expected to rise further in 2026-2027. Governments will face fiscal constraints due to high public debt levels relative to GDP, particularly in Japan and the U.S., increasing long-term country risks. This leads investors to seek higher risk premiums from holding long-term bonds, resulting in continued pressure on currencies, especially the U.S. dollar and yen, which have high public debt ratios. Therefore, we believe that long-term government bonds and the U.S. dollar and yen will continue to face ongoing pressure. Emerging markets (EM) with fewer public debt constraints, such as China and India, will benefit from a weaker U.S. dollar. Most major countries' fiscal policies focus on economic growth alongside enhancing strategic competitiveness, particularly in AI development and national security, which will positively impact the economy and corporate earnings. Increased military and defense spending globally reflects heightened geopolitical risks, supporting a greater diversification of investments into gold.

The current financial market is increasingly sensitive to economic data, particularly as the Fed has shifted to a more meeting-based decision-making policy, lacking clear forward guidance. This results in economic data playing a more significant role in investors' monetary policy forecasts, leading to greater asset price volatility, compounded by reduced market liquidity. The current market environment is fragile in both structural and mechanical aspects, so even moderate deviations from market expectations can lead to significant price movements across assets. Furthermore, geopolitical fragmentation is adding uncertainty to the macroeconomic landscape and directly impacting asset prices in financial markets, making geopolitical fragmentation a permanent factor shaping the context of the global economy and financial markets, rather than just a short-term volatility driver. Therefore, in investment decision-making, investors need to elevate geopolitical risk as a primary assumption in asset valuation and portfolio management, rather than viewing it merely as a tail risk as in the past. However, we expect that the conflict between the U.S. and Venezuela will have limited effects on the economy, inflation, and global oil prices. It is recommended to monitor changes in U.S. foreign policy and Venezuela's energy infrastructure recovery that may increase oil supply in the global market, potentially alleviating long-term inflationary pressures.

SCB CIO maintains a positive outlook on risk assets, emphasizing investments in U.S. equities under the AI theme and selectively investing in EM markets in case geopolitical conflicts do not escalate.

Regarding the AI theme in 2026, it is transitioning from accelerating investments in AI infrastructure to a phase where tangible results on corporate earnings are expected, both in terms of revenue growth and cost reduction, as AI processing shifts from training to real-world application. Leading AI model developers are beginning to report increased revenues, reflecting that AI can be more effectively utilized in business sectors. The winners in AI technology are likely to be companies positioned prominently in the AI value chain, including: 1) foundational systems and processing, such as memory (HBM), energy management, cooling systems, and electrical networks; 2) operating systems and intelligent workflows, such as software companies embedding Agentic AI into systems; 3) comprehensive data ecosystems and platforms, such as chip design and model development companies. Non-technology companies that can leverage AI to reduce operational costs and enhance profitability, such as those in finance and utilities benefiting from the increased electricity demand of AI data centers, are also expected to emerge as winners.

Investing in the AI theme in 2026 will depend on in-depth selection and appropriate portfolio diversification. It is recommended to shift investment focus from technology stocks in infrastructure to data, applications, and power sectors. For non-technology companies, focus on selecting firms that utilize AI to reduce costs and maintain profitability. Additionally, given the concentration of AI stocks in the U.S. market, investors should seek investment opportunities outside the U.S., such as South Korea, which leads in memory chips in the AI supply chain, and Japan, which benefits from governance reforms and strong profit growth, as well as businesses that benefit indirectly from AI, such as energy and electrical networks. Furthermore, portfolios should be supplemented with gold to mitigate volatility from macroeconomic factors and geopolitical risks.

Investment recommendations for the Core Portfolio: SCB CIO suggests generating cash flow by gradually investing in long-term government bonds and high-quality short-term corporate bonds in the U.S., alongside investments in infrastructure assets, REITs, and Private Assets to create consistent cash flow. For growth opportunities, focus on investing in U.S. equity funds that primarily benefit from the AI theme, while also ensuring portfolio flexibility by investing in Japanese and South Korean equity funds with companies in the AI supply chain and the Chinese stock market (All-Share), where the government has policies for technological self-reliance and enhancing AI capabilities, as well as the Indian stock market, which is supported by domestic demand. Additionally, investing in gold is recommended to reduce volatility from macroeconomic factors. For the Opportunistic Portfolio, for investors with moderate to high risk tolerance seeking short-term investments, it is advised to focus on funds related to the AI theme, including semiconductor sectors where AI and Data Center investments drive profit growth, Chinese technology sectors where AI investments are beginning to generate real revenues, and sustainable energy businesses benefiting from AI, which have lower valuations, higher dividend yields, and less volatility, as well as healthcare sectors where profits are expected to continue increasing, supported by research and development of new products anticipated to progress in the first quarter of 2026.

Source: Quarterly Outlook 1Q2026

Prepared by SCB CIO as of January 15, 2026. Please note that information may change at any time, and users should exercise caution in making investment decisions.

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