The weakest US labour data since the pandemic has forced the Federal Reserve into a policy shift — and with it, investors worldwide are reassessing.
In an interview with Global Private Banker, Prashant Bhayani, Chief Investment Officer for Asia at BNP Paribas Wealth Management, said investors should prepare for lower rates while resisting the temptation to anchor portfolios to a single narrative. In a wide-ranging conversation, he outlined how Asia’s high-net-worth clients can position for softer US growth, rising geopolitical risks and the largest intergenerational wealth transfer in history.
Rate cuts and the shifting global cycle
August’s non-farm payrolls marked the weakest three-month stretch for US job growth since the pandemic, prompting Fed chair Jerome Powell to signal at Jackson Hole that employment concerns now weigh as heavily as inflation in policy deliberations. The September rate cut confirmed that pivot.
“We expect another three 25 basis point cuts by mid-2026,” Bhayani said. “The duration and depth of the cycle will remain sensitive to labour data, though inflation trends will still shape how much pass-through is tolerated.”
That shift has clear implications for portfolio positioning. “We continue to be overweight non-US equities including emerging markets, China, Japan and Europe,” he explained. “A weaker dollar loosens financial conditions and gives global central banks room to ease. On bonds, we favour quality at the shorter end of the curve, while maintaining a long-term overweight in precious metals.”
Beyond the Fed: a higher-for-longer world
While the near-term debate is dominated by US rate cuts, Bhayani argues that investors should not assume a return to the pre-pandemic era of zero or negative rates. Structural forces — from supply-chain regionalisation to tighter immigration and tariff policies — are likely to keep inflation and yields elevated.
He noted that central banks are unlikely to revisit negative rates outside of a deep recession. Real yields, he added, are closer to historical averages seen in the 1990s, making them more attractive than in the recent past.
For high-net-worth investors, that means a renewed focus on risk-adjusted returns. “We favour quality sovereign and investment-grade bonds with shorter maturity, and tactically extend duration if yields back up,” Bhayani explained. “In fixed income, it is also vital to source uncorrelated alpha. That is why we use alternative managers that can go long and short bonds, delivering lower correlation to the market.”
Gold remains a core allocation in this context. “We view it as a currency rather than a commodity — and it has outperformed all major currencies since the end of the gold standard,” he said.
China, India and the power of diversification
Amid talk of China’s structural slowdown and India’s rise, Bhayani is cautious about one-sided bets.
“Diversification is the only free lunch,” he said. “No matter the narrative, we always treat it as mission critical in global asset allocation.”
BNP Paribas Wealth Management has maintained a China overweight, despite property, consumption and demographic headwinds. “There are investable themes in China including artificial intelligence, domestic brands and improved corporate returns supported by share buybacks,” Bhayani argued. “After three years of underperformance, this year China equities have been among the world’s best performers.”
India remains attractive long term but stretched tactically. “It is a market with high return on equity, strong domestic inflows and favourable demographics,” he said. “After the US, India has been the best-performing major market since 2009. But valuations and declining earnings momentum mean we are currently neutral, ready to revisit when the balance improves.”
Preparing for wealth transfer and overlooked risks
Asia is at the centre of one of the largest intergenerational wealth transfers in history, with an estimated USD 2.5 trillion expected to move between generations over the next decade. Families are grappling with divergent risk appetites and values.
“The most successful families are not forcing a one-size-fits-all approach,” Bhayani said.
“They are designing structures that allow for plurality within a common framework — security for the elders, innovation for the next generation and a shared legacy at the centre”, he added.
He warned against complacency on concentration risk in US equities and the unknowns around AI capital expenditure. “For the past 15 years, investors could simply hold US equities and outperform,” he said. “But valuations are now exceptional. Adding regional diversification is not just prudent, it is an opportunity.”
AI, meanwhile, is both promise and peril. “No one yet knows the real return on AI investment,” Bhayani said. “It could echo the dotcom bubble, where overinvestment led to capital destruction. But if productivity gains prove real, it could be the start of a capex supercycle.”
