Investors urged to go defensive on AI risks and US dollar weakness

CIMB warns AI valuations could trigger downside risk.

CIMB said investors should adopt a balanced portfolio strategy in 2026, combining exposure to artificial intelligence (AI)-driven growth with defensive assets to manage rising market volatility.

In its 2026 Market Outlook report titled “The Need for Measured Exuberance,” the bank said AI remains a key driver of global equity performance, but elevated valuations and policy uncertainty could increase downside risks.

For Singapore investors, who normally hold diversified portfolios across US and Asian markets, CIMB highlighted the need to avoid over-concentration in technology stocks and recommended maintaining allocations to fixed income and alternative assets.

The bank also pointed to a potential weaker US dollar environment which could affect returns on overseas investments held by Singapore residents.

According to the report assets such as gold could help cushion portfolios during periods of market stress.

CIMB said disciplined asset allocation will be critical for local investors as geopolitical risks and shifting monetary policy continue to shape global markets in 2026.

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