Revealing the winners of 3 investment themes as the world enters "selection" mode for investments. 

The stock market is currently entering the season when listed companies begin announcing their Q2 2026 earnings, amidst a trend of fund flows shifting away from AI stocks as investors seek profitable returns, causing several stock markets to fall from their all-time highs reached in the first half of the year.

The US-Iran conflict in the Middle East continues to this day, with the Strait of Hormuz still opening and closing intermittently, amidst the chaos surrounding toll collection by both sides. Naturally, this impacts shipping costs, increasing them. However, the global perception is no longer as significant as the initial period of heightened investor panic, before gradually improving and people shifting their focus to first-quarter earnings reports from listed companies.

In the second half of the year, the world continues to face significant challenges from global economic uncertainty, geopolitical conflicts, US trade policy, and the direction of the Federal Reserve's (Fed) interest rates, which are under high inflationary pressure, even though oil prices have fallen to near pre-war levels earlier this year. And of course, the second-quarter earnings figures and the signals from company executives in the market will determine the future growth prospects.

These are key factors in determining the direction of financial markets in the second half of the year. I'll discuss what we need to monitor, what types of risks we need to prepare for, and what investment themes are interesting to ensure our core and satellite portfolios can survive in the long run.

The world is volatile, with stocks and bonds fluctuating—an uncontrollable risk.

The global stock market situation over the past 1-2 months has been extremely volatile. Leading the way is the US stock market, which has been fluctuating daily based on news. Asian stock markets have been hit harder, with South Korea plummeting into a bear market after two semiconductor tech stocks, which had experienced a bubble burst after only a little over a month of strong growth, due to the AI ​​infrastructure craze.

US stock markets surged today driven by positive news that the June CPI inflation rate came in at 3.5%, lower than analysts' expectations. This led the market to reduce the likelihood of the Fed raising interest rates at its July 28-29 meeting.

The slowdown in inflation figures reflects easing price pressures and may open the door for the Fed to maintain interest rates at 3.50%-3.75% or adopt a more dovish monetary policy stance if the downward trend in inflation continues in the near future.

While Kevin Warsh, the new Fed chairman, signaled for the first time since taking office that the Fed will conduct monetary policy independently and continues to prioritize controlling inflation, even though the June CPI came in lower than expected, the market interpreted this as a sign that the Fed is "not in a hurry to cut interest rates" at this meeting.

He also signaled a potential hawkish bias in monetary policy if inflation remains high, stating that he will discuss with Fed committee members the "timing and magnitude" of various policy measures to ensure inflation returns to the target sustainably.

The Federal Reserve Chair's statement partially mitigated the sharp rise in the U.S. bond market, although the yield on 2-year Treasury bonds declined (leading to higher secondary bond prices), while the S&P 500 index edged slightly higher and the dollar weakened. This reflects the market's continued cautious assessment of the Fed's monetary policy direction.

However, despite lower inflation expectations, the market still holds a 20% chance that the Fed may raise interest rates at its next meeting. Therefore, inflation data and economic indicators in the coming period will remain key factors determining the direction of global financial markets.

On the other side of the US market, the sharp decline today was driven by heavy selling in the technology/AI sector, pushing the Nasdaq index from positive to negative for several days. Even ASML shares, which had surged more than 8% after announcing better-than-expected earnings, were pushed back into negative territory by selling pressure. This is a clear picture of the new market era. The term "good stock" doesn't necessarily mean it will go up every day, and volatility isn't necessarily the enemy of investors.

Similarly, in the US bond market, US bond yields surged to 4.6%, nearing their highest level in 20 years since 2007. But what the market fears isn't just interest rates... but the fact that the US public debt, reaching $40 trillion, is about to incur high interest costs.

On the Asian stock market side, although both Taiwan and South Korea recently saw their markets surge to all-time highs driven by AI stocks, only the South Korean stock market experienced a decline. This is because most investors were trading on margin. When AI stocks were heavily sold off for profit-taking, the sharp drop affected over 2 investor accounts, triggering a force sale that caused the market to plummet rapidly as seen today.

As tensions in the Middle East escalate, investors are selling off shares to reduce risk, causing already fragile markets like the KOSPI (South Korea) to fall sharply. The Nikkei 225 (Japan), Shanghai Composite (China), and TAIEX (Taiwan) also experienced similar declines. The NIFTY 50 (India) only edged down slightly after a significant correction last year.

The Chinese stock market was another market hit by bad news in recent days, following the release of second-quarter GDP growth figures showing a 4.3% growth, the lowest in three years since the COVID-19 pandemic and below analyst expectations. Meanwhile, the Shanghai Composite closed at its lowest level in over three months this year on July 16th, pressured by selling in technology stocks and concerns about the Chinese economy.

Despite facing economic challenges, China's authorities released second-quarter GDP figures that were below target, signaling a willingness to reflect a more realistic economic picture. This may leave room for greater flexibility in future economic policy and raise expectations for future government stimulus measures.

The International Monetary Fund (IMF) has revised its forecast for China's GDP growth upwards from 4.4% to 4.6%, citing strength in its high-tech manufacturing sector and exports. This is higher than the global economic growth forecast, which has been revised downwards from 3.1% to 3%.

The global situation this year still presents many challenges, both risks and opportunities. Volatility will impact portfolios in the short term; this is a risk that no one can control and something investors must understand and accept. However, we do have an option: "Investing with managed risk."

The market is starting to pick its "winners." Keep an eye on these 3 themes and add them to your secondary portfolio for the second half of the year.

Many people have been asking what opportunities are available right now.

I'd like to give you a look at fund flows over the past 1-2 weeks. Value stocks have started to rise significantly again, especially high-dividend-paying value stocks in the Thai stock market, and Japanese value stocks have also seen a strong rebound.

With a large amount of fund flow exiting the AI ​​sector or growth stocks that have already achieved sufficient profits, investors are deciding to rebalance their investments into value stocks that pay dividends, as a hedge against potential market or AI downturns.

As global capital flows shift from "concentration" to "diversification," and markets are no longer in a "buy anything and it will go up" mode, but rather a "rational buying and selling" mode, three themes are emerging as winners in the second half of the year!

The first theme is still AI Supply Chain. Global megatrends are expected to persist for the next 5-10 years. As AI enters a new phase of major capital expenditure (CAPEX), global data center investment will continue to grow. Cloud and AI agents are becoming widely used, keeping the demand for HBM chips, GPUs, and networking equipment high.

Related industries or stocks include semiconductor groups, AI infrastructure, cloud, cybersecurity, and power & cooling, while Japan, Taiwan, and South Korea are laying the foundation for the global AI industry.

Risks to watch out for: These stocks have very high valuations, especially in the US, where they've risen for three years, and this is the fourth year. There's a risk of a correction. However, outside the US, there are many other interesting countries. Another risk to watch is that recent major investments by big tech companies could be halted or cancelled in the future, or if there's significant overcapacity, it could impact these stocks and cause a market shock and stock crash.

The second theme is Supply Chain Shift. Following on from the first theme, Vietnam and India have benefited from the relocation of manufacturing bases away from China, resulting in a large influx of foreign direct investment (FDI). Most recently, Vietnam has emerged as a major semiconductor manufacturing hub in ASEAN. Previously primarily an electronics assembly base, it has now evolved into a semiconductor industry ecosystem. While currently in the early stages of upgrading to advanced semiconductor supply chains, this will lead to structural changes in value-added exports and a restructuring of the digital economy.

The third theme is Value Play. This is a theme that investors and fund managers, including hedge funds, are flocking to invest in value stocks in various markets after the US market reached all-time highs for three consecutive years, and this is the fourth year, raising the risk of a correction.

On the Asian side, there are several markets where valuations are not yet excessively high.

"China" This market still offers attractive valuations for long-term investors, as it undergoes a structural transition to a digital economy and accelerates the development of its own AI chips to reduce reliance on imports from the United States. Personally, I believe that in the next five years, China could surpass the US to become number one, or it might remain in second place.

Risks facing China also include its trade policy with the United States, the ongoing recovery in the real estate sector, weak consumer spending, the risk of Chinese intervention in the business sector when seeking restructuring, and the stability of the yuan exchange rate.

In terms of valuation, the Chinese stock market remains relatively undervalued, whether it's A-shares in mainland China or H-shares in Hong Kong. Dividend-paying stocks (excluding the highly volatile high-tech sector) in China and Hong Kong still offer attractive value stocks with periodic inflows. If you are interested in individual stocks in the Chinese and Hong Kong markets, you can find analysis of high-quality, undervalued stocks here. Jitta.com okay

'Japan' The topic is being discussed again, not just because of rising stock prices or a weakening yen. Many are paying attention to the structural changes in the Japanese economy that have been ongoing in recent years, after emerging from a decade of deflation. There have also been reforms in the stock market and listed companies, with listed companies placing greater emphasis on shareholders through share buybacks, dividend payments, and improved return on equity (ROE).

Today, the economy is showing signs of recovery, with wages and inflation returning to appropriate levels. Japan also remains a key hub for the AI ​​industry, from chip manufacturing machinery to semiconductor materials.

Another point that investors are watching is the valuation of the Japanese market, which is still relatively low compared to US technology stocks.

However, this does not mean that the Japanese stock market will continue to rise or be free from volatility, as there are still factors to monitor, such as interest rate hikes by the Bank of Japan (BOJ) and the direction of the yen, which is likely to weaken.

While the stock market still presents investment opportunities, it must be acknowledged that today, global stock markets are driven more by profit-driven gains than by long-term investments based on fundamentals. This is reflected in the significant dominance of AI stocks in the global market.

Veteran investor Warren Buffett remains concerned about market behavior in recent years. He recently criticized the current stock market on CNBC, stating that it is driven more by speculation than by long-term, fundamental investing.

He also warned investors, "The stock market is like a gambling den now," where most people choose speculation over investing. Finding good deals or stocks with worthwhile investment value is very difficult.

He previously compared today's stock market to a "church with a casino attached," meaning that the stock market should be a place for long-term investment and value creation (the church), but it is increasingly dominated by risk-taking and short-term speculation (the casino). Buffett believes this can distort the market's true value.

Investing according to the principles of “Diversify Your Investments – DCA – Rebalance”

Of course, no matter what anyone advises, ultimately we have to make our own decisions. Therefore, to manage risk through investment, the first thing we must do is educate ourselves on investing and understand how to diversify our portfolio appropriately.

Diversifying risk may not necessarily lead to better returns, but it helps protect us during unfavorable or worst-case scenarios.

Therefore, portfolio diversification is always essential. Avoid betting or speculating heavily on a single asset, as going all-in on a single asset carries extremely high risk.

People often only look at the opportunity side, thinking, "We'll get rich," and while stocks have indeed risen recently, it's crucial to understand that the stock market is volatile and subject to uncontrollable factors. These include conflicts between Iran and the US, the opening and closing of the Strait of Hormuz, and the direction of US interest rates—all beyond our control.

The undeniable truth is that no one can predict market timing with 100% accuracy. The key to sound investing isn't timing buy-sell orders, but rather disciplined asset allocation using a Core & Satellite Portfolio approach. This helps mitigate market volatility and ensures long-term portfolio survival.

The core portfolio focuses on diversifying investments into high-quality equities and bonds globally to provide a solid foundation. Therefore, the proportion of the core portfolio should be at least 50% to 80%, depending on the acceptable risk level and a good understanding of various asset classes.

The supplementary portfolio (20-30%) is considered a high-return portfolio, sometimes referred to as a speculative portfolio. It focuses on investing in themes with high growth potential, such as the three themes I recommended, as well as emerging markets like Taiwan, Vietnam, or China, to increase the opportunity for additional returns.

Generally, most people allocate 70-80% of their portfolio to a primary portfolio and the remainder to a secondary portfolio to limit the risk of the secondary portfolio in case of losses. This is a risk management strategy that you must decide for yourself.

Disciplined investing involves consistent, gradual investments using a Dollar Cost Averaging (DCA) approach, perhaps monthly, every two months, or tailored to your savings. Maintaining portfolio health through rebalancing is crucial; when asset allocation becomes skewed, consider selling excess assets and holding some cash for liquidity, ready for the next investment cycle when market volatility arises. This method of "making your money work" generates compound returns, leading to significant portfolio growth over the long term.

The keys to success in investing lie in three things: "principal," "compounding return," and "time." Under the principles of Asset Allocation – DCA – Rebalancing, you will achieve investment success.

We may not get the highest returns, but if we hedge our risks, we'll certainly have peace of mind and sleep soundly. And if we hold on for as long as possible, the compound returns will cause our portfolio to grow steadily. When that day comes, you'll be able to retire comfortably.