- Cathay United Bank of Taiwan expects the US Dollar Index to fluctuate between 97 and 100 in the second half of 2026, while the yield on the US 10-year Treasury bond will consolidate between 4% and 4.5%, mainly due to the dual pull of risk aversion sentiment and the Federal Reserve's interest rate cut path.
- Chief Economist Lin Qichao pointed out that driven by investments in artificial intelligence, tariff policies, and geopolitical factors, the global supply chain is undergoing a major reshaping trend. Taiwan, as a core beneficiary, is expected to move towards an annual economic growth rate target of 10%.
- Driven by strong fundamentals, the profits of Taiwanese listed companies are expected to grow by 53% and over 28% in 2026 and 2027, respectively, with after-tax earnings potentially challenging 7 trillion and 9 trillion New Taiwan Dollars. However, caution is advised regarding the risk of volatility due to the widening deviation rate in the stock market.
Dual Pull in Currency and Bond Markets
In its latest outlook for the second half of the year, Cathay United Bank, a subsidiary of Cathay Financial Holdings (2882:TT), noted that the future trend of the US dollar will continue to face the dual impact of fluctuating global market risk appetite and delayed expectations of US interest rate cuts. Amid the interplay of these forces, the US Dollar Index lacks the momentum for a unilateral breakthrough in the short term. Meanwhile, the fixed income market will also maintain a range-bound pattern. If US core inflation fluctuates, expectations for interest rate cuts may be further delayed, causing the yield on the 10-year US Treasury bond to consolidate at a high level of 4% to 4.5%, requiring investors to reassess the duration of overseas asset allocations.
Uncertainty in the Fed's Interest Rate Cut Schedule
Regarding the much-watched direction of monetary policy, Cathay United Bank's Chief Economist Lin Qichao stated that due to current inflationary pressures showing signs of heating up, the Federal Reserve (Fed) is expected to maintain the current benchmark interest rate unchanged until September 2026. As for the interest rate cut schedule in the fourth quarter, due to multiple external variables such as geopolitical factors and supply chain restructuring, there is still a high degree of uncertainty. If inflation levels do not fall as expected, the probability of the Fed maintaining high interest rates for a longer period within the year will significantly increase, exerting continuous pressure on the global liquidity environment.
Supply Chain Reshaping and Macro Dividends
In the profound evolution of the global macroeconomic landscape, Lin Qichao emphasized that under the combined influence of the wave of investment in artificial intelligence technology, tariff policy barriers, and geopolitical frictions, the global supply chain is exhibiting a fundamental trend of major reshaping. This trend is redistributing global industrial dividends. Thanks to its core position in the semiconductor and artificial intelligence hardware industry chain, Taiwan's economy shows strong resilience and is expected to become one of the biggest beneficiaries of this round of supply chain restructuring, driving Taiwan's annual economic growth rate to challenge the 10% level.
Corporate Profit Explosion and Volatility Warning
In terms of the fundamentals of the capital market, the research team has given very optimistic quantitative forecasts for the profit prospects of Taiwanese listed companies. It is expected that the profits of Taiwanese companies will achieve high growth rates of 53% and over 28% in 2026 and 2027, respectively, with overall after-tax earnings having the opportunity to consecutively surpass the 7 trillion and 9 trillion New Taiwan Dollar thresholds. Although strong profit fundamentals provide solid support for the long-term performance of the stock market, Lin Qichao also reminds that due to the possibility of excessive short-term stock price increases leading to a large technical deviation rate, the magnitude of market corrections and volatility may also increase simultaneously, and market participants should prudently assess the risks of leveraged operations.
