Midterms primed to test asset allocation

The US midterm elections are set to introduce uncertainty to global financial markets, causing investors to reevaluate their positions in equities, gold and cryptocurrencies, according to investment executives. Win Phromphaet, chairman of Kasikorn Asset Management, noted that market reactions would be difficult to predict even if the election outcome was widely expected.

With the political landscape divided, extreme policies may become harder to implement, potentially leading to increased policy stability. The US equity market, comprising about 60% of global equity portfolios, calls for careful allocation, given the importance of assessing exposure. Gold, supported by central bank and institutional demand, is another asset to watch, with potential accumulation recommended at prices around US$3,900-4,000 per ounce.

For oil, investors should wait for price declines due to ongoing geopolitical risks. Cryptocurrencies face unique challenges following the vote, particularly concerning regulation and Bitcoin's market cycle. Gracy Chen, CEO of Bitget, predicts Bitcoin will reach a cyclical low within a month after the midterm elections and could approach or exceed its low following the election, though timing remains uncertain.

A support level around $76,000 could aid Bitcoin's recovery. In Thailand, the market is pivoting towards value and defensive stocks as the economy improves, foreign direct investment rises and investor confidence rebounds. High-dividend Thai shares and property, infrastructure and real estate investment trust funds could offer yields of 5-9%.

Banks, energy, retail and telecom are among the defensive sectors to consider. The Thai government's proposed tax-saving investment measures, such as the Thailand Individual Savings Account, could indirectly support dividend-paying stocks, alongside Thai ESG funds focused on these companies. For tourism-related stocks, investors should focus on tourist quality and spending per person, rather than visitor numbers.

A diversified portfolio across global equities, bonds and alternative assets is advised for long-term investors, with foreign bonds attractive due to their yields and income potential.