THE HIKE THAT FLIPPED THE SCRIPT
Nobody started this year planning for it. On 16 September, the Federal Reserve raised rates by a quarter point to 3.75% to 4%, its first hike since 2023, and every voting member agreed. For most of 2026, investors had been waiting for cuts. The Fed did the opposite.
The trigger was oil. Higher fuel costs from the Iran war, plus leftover tariff effects, kept inflation stubborn, and officials decided they could no longer wait it out. As recently as 29 July, three regional Fed presidents voted against holding and wanted a hike. Then Chair Kevin Warsh spoke at Jackson Hole on 28 August, and the 10-year Treasury yield has climbed about a quarter point since.
THE BANKS THAT QUIETLY RAN THE TABLE
Here is the part a lot of beginners missed. As of 4 September, the STI was up 24.6% for the year and closed at a record 5,801.96. That rally was carried mostly by DBS, OCBC and UOB, which each gained roughly 3% to 4% in the week markets priced in the hike.
Why do banks love higher rates? They earn the gap between what they charge on loans and what they pay on deposits. That gap shrank by about 17 to 25 basis points at all three banks in the first half of 2026, after the last round of cuts. A hike lets floating-rate loans reprice higher, which can slowly rebuild it.
The catch is that this good news was already in the price. Dividend yields on the big three now sit around 4%, and DBS barely moved after the decision, closing at SGD 76.86 on 18 September. Buying after a 25% run is a very different bet from buying before it.
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THE REITS YOU BOUGHT TO SLEEP WELL
Now the other side of the portfolio. S-REITs are what many beginners buy for calm, steady payouts, and this year they have delivered neither. As of 4 September, the S-REIT index was down 8.2% while the STI was up 24.6%. Same market, opposite experience.
The reason is simple. When Singapore's 10-year government bond yields 2.38%, up more than half a percentage point in a year, a REIT's payout looks less special. REITs also carry a lot of debt, and floating-rate borrowing costs follow global rates with a lag of a few weeks.
Yet the assets themselves are not cracking. Managers have kept growing distributions, yields sit around 6.3%, and the sector trades at about 0.86 times net asset value, meaning roughly a 14% discount to what the properties are worth on paper.
YOUR CASH JUST GOT A RAISE
Something quieter happened too. The 6-month Singapore T-bill cut off at 1.70% at the 10 September auction, its highest of 2026, and MariBank now pays 2.88% on savings with no conditions. That is nothing like the near-zero years.
It is still far below what REITs pay, but that gap is compensation for risk, not free money. A T-bill is locked and government-backed. A REIT can lose 8% of its price before the payout even helps. And if you carry a floating-rate mortgage, the hike is about to show up in your monthly repayment.
HOW TO HOLD BOTH SIDES WITHOUT LOSING SLEEP
Do not expect a quick reversal. Fed officials are split on 2027, with eight pointing to another hike, six to a hold and four to cuts, and markets already price in one more hike this year. Higher for longer is the base case.
The investors who handle rate cycles well are rarely the ones with the best prediction. They are the ones whose portfolio does not force them to guess. Banks benefit but have already run, REITs hurt but are priced below their assets, and cash pays decently but slowly loses to inflation if it sits too long. Before judging any REIT, check how much of its debt is fixed rather than floating.
With 20 years of investment expertise, Caleb Gan is a seasoned professional in stock trading. The hard work and dedication were recognized when his partner and him were featured on Singapore TV Channel 9's MoneyWeek, a prominent financial program. He's also had the privilege to share insights on radio stations like 93.8Live, Capital 95.8FM, and 96.3FM through live interviews about stock market investments. Beyond that, he's also the co-founder of NDU System, where he continues to help others navigate the world of trading.
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