Paul Lee
Chief Executive Officer & Chief Investment Officer
Portfolio Manager, Paragon Alpha I
General Partner, Paragon Ventures I
General Partner, Global Real Estate Alternative & Tactical (GREAT) Fund
At our Investor Day in January, we framed 2026 as a year of slower, uneven growth but not recession; a year in which the US would continue to lead developed markets, supported by investment around artificial intelligence; and a year where central banks would still prefer to ease, but not as aggressively as markets hoped. We also cautioned that China would remain challenged by low growth and deflation, that trade tensions would change form rather than disappear, and that fiscal and geopolitical risks would continue to stalk markets.
The first five months of the year have broadly validated that framework, albeit with more volatility than expected. The escalation in the Middle East, and the weaponisation risk around the Strait of Hormuz, reminded investors that energy remains the transmission channel between geopolitics, inflation and monetary policy. Higher oil prices have interrupted the global disinflation trend, lifted inflation expectations and delayed the timing of rate cuts. This is consistent with Carinn’s observation that fixed income markets have had to reprice from a straightforward easing cycle to one where central banks must balance growth risks against renewed inflation pressure.
For equities, the market has been even narrower than we had anticipated. Sean is right to highlight that AI infrastructure spending has become the overwhelming driver of global equity returns. The hyperscalers’ capital expenditure cycle remains powerful, and AI continues to move from promise to deployment across data, productivity, customer engagement and risk management. Yet the opportunity is not without risk. Valuations in parts of the AI supply chain are demanding, positioning is crowded, and any disappointment in earnings, energy availability or policy support could trigger sharp corrections. Our preference remains to own profitable businesses with durable advantages, rather than chase every AI-related theme.
Paragon Alpha I entered 2026 with the same principles that have guided us since inception: patience, prudence and purpose. During the February–March sell-off, the S&P 500 fell about 10% from its early-February high as investors reacted to the Middle East conflict and the threat to global crude supplies. PAF declined 5.41% in the first quarter, driven by mark-to-market valuation movements rather than realised losses. Importantly, we did not exit positions in panic. Instead, we used the optionality from our cash holdings to add selectively to companies we like, including Amazon, Visa and DBS. By April, markets had recovered strongly, the S&P 500 reached a new high, and PAF recorded a strong gain of 9.94% for the month.
This is an achievement not because volatility disappeared, but because our process held. We stayed invested, avoided unnecessary turnover, and added to quality when market fears created better entry points. It is the same discipline Emmanuel described: in an environment where yields, the US dollar, gold, oil and commodities are all being pulled by geopolitics and inflation expectations, one must remain flexible but not reactive.
Looking ahead to June–December 2026, our base case remains constructive but cautious. We do not expect a global recession, but growth will likely be slower and more uneven. The US should remain relatively resilient, supported by AI-related investment, corporate profitability and deep capital markets. China is likely to remain constrained by deflationary pressures and weak confidence. Europe and energy-importing economies will be more vulnerable to higher input costs. Inflation should moderate only gradually, and the path will depend heavily on oil, freight, food and weather-related risks, including El Niño’s impact on agriculture prices. Central banks may still prefer to ease, but any easing cycle will be shallower and more data-dependent than markets expected at the start of the year.
For our flagship Paragon Alpha I, this means continuing to stay invested while deploying capital selectively. We maintain our bias towards high-quality, profitable companies, balance growth exposure with valuation discipline, and preserve sufficient liquidity to act when volatility creates opportunity. In our view, the second half of 2026 will reward neither complacency nor excessive defensiveness. It will reward patience, selectivity and the ability to distinguish temporary market fear from permanent impairment. That remains our commitment to investors.
To recap, click here to access the video on overall market outlook for 2026.
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Carinn Neo
Managing Director & Senior Portfolio Manager
Paragon Income I
We began 2026 with a constructive outlook on fixed income, as attractive absolute yields and stable credit fundamentals continued to provide a supportive backdrop for bond investors. However, the escalation of the Middle East conflict led to a sharp increase in oil prices, raising concerns over renewed inflationary pressures. This prompted a repricing of interest rate expectations, with markets scaling back anticipated rate cuts and beginning to price in the risk of further tightening by the US Federal Reserve. In response, the Fund adopted a more defensive positioning, actively rotating from lower-coupon bonds into higher-yielding opportunities to capitalize on increased market volatility. The Fund generated a positive return of 0.87% from January to April 2026.
As we move into the second half of 2026, financial markets are likely to remain highly sensitive to developments in the Middle East and their potential impact on oil and broader commodity prices. A prolonged conflict could drive energy prices higher, creating renewed inflationary pressures and complicating the global monetary policy outlook.
Looking ahead, we continue to view fixed income markets constructively, with absolute yields remaining attractive by historical standards. As equity market returns become increasingly concentrated in AI-related and other high-growth sectors, high-quality fixed income offers investors an attractive source of income while providing valuable diversification benefits and portfolio resilience across market cycles. We believe this balanced approach remains particularly relevant amid heightened geopolitical uncertainty and evolving monetary policy expectations.
To recap, click here to access the video on market outlook relating to fixed income for 2026.
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Sean Quek
Managing Director & Senior Portfolio Manager
Paragon SAGE Fund
At the outset of 2026, we had anticipated a continued rise in equity markets supported by further broadening of market participation across sectors and regions. However, the year-to-date performance so far has diverged from this expectation. AI infrastructure related spending has been the overwhelming driver of global equity performance, fuelled by hyperscalers’ relentless capital expenditure on AI buildout. This has resulted in a markedly narrower market breadth with gains concentrated in a limited group of semiconductor companies, particularly within the memory segment, while other areas of the market have lagged. Against this backdrop, Paragon SAGE Fund lagged the market over the January to April 2026 period, delivering a return of -4.2%.
Looking ahead, the narrow breakout in the AI infrastructure related names highlights the risks associated with concentrated market positionings, especially amid an increasingly uncertain macro environment. Ongoing geopolitical tensions, including the unresolved US-Iran conflict, alongside escalating inflation risks, further reinforce the potential for heightened volatility.
Nevertheless, Paragon SAGE Fund remains disciplined in its investment approach, focusing on identifying above-average companies trading at below-average valuations. We believe this approach positions the portfolio to navigate near-term market distortions while maintaining the potential to generate sustainable long-term returns as market breadth normalises.
To recap, click here to access the video on market outlook relating to global equities for 2026.
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Emmanuel Lim
Managing Director & Portfolio Manager
Paragon Alpha I
Precious and Industrial metals did well at the start of 2026. And then everything changed when the US attacked Iran. The Straits of Hormuz became weaponized, and every trading asset became hostage to oil prices and Trump’s tweets. The reflationary story morphed into one of dreaded deflation. Global yields spiked and USD found its footing. As war fatigue set in, the markets started to re-focus on the AI story again and US exceptionalism returned.
Looking ahead, we will need to keep an eye on global bond yields and how the new US FED chairman steers monetary policy. While inflationary expectations stay elevated, I do not expect the tail risk of a recession to occur. Gold and Silver may still face near-term headwinds but there could be an opportunity to buy on a sell down. The broad USD should be stuck in a range however there will be crosscurrents that will allow pairs like AUD and SGD to do relatively better and as an outlier, JPY to stage a rebound as Japanese institutions cannot ignore 30-year JGBs near 4%. El Nino and its impact on Agriculture prices is also worth keep in view.
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Note: For “Accredited Investors” and/or “Institutional Investors” only as defined in the Securities and Futures Act (Cap. 289)