Markets Are Mispricing the Fed – And Investors May Pay the Price, Warns Top Strategist
Dr. Sailesh Kumar Jha, Global Market Strategist and former Chief Asia Economist at Credit Suisse AG Singapore, says a 10 to 20 per cent correction in US equities could be imminent as markets wake up to an underpriced Federal Reserve tightening cycle – but he remains bullish on Malaysia, the ringgit and gold, and is telling investors to buy the dip.
By Tengku Noor Shamsiah Tengku Abdullah | TNS News | June 22, 2026
Kuala Lumpur, June 22 –
KUALA LUMPUR, June 22 – In a message to TNS NEWS ahead of this interview, Dr. Sailesh Kumar Jha was direct: “As I had indicated in my May Malaysia Reserve newspaper article, a large sell-off in US equities in June or July. Likely around 10 per cent if not more, as markets reprice the path of Fed policy. Today’s sell-off is just the beginning.”
The Global Market Strategist has been sounding this alarm since May and in an exclusive interview with TNS News, he laid out in forensic detail why he believes US money markets have badly underestimated how far the Federal Reserve will need to tighten, what that means for global equities and the dollar, and why, despite the gathering clouds, Malaysia stands on relatively solid ground.
Dr. Sailesh Kumar Jha is a Global Market Strategist and former Chief Asia Economist at Credit Suisse AG Singapore. With more than two decades of experience at the highest levels of investment banking and buy-side research, he has held senior roles across the United States, Singapore, Hong Kong, Malaysia, the Philippines and Taiwan.
He is one of Asia’s closely followed voices on monetary policy, currency dynamics and geopolitical risk.
The Mispricing That Will Trigger the Sell-Off
At the heart of Dr. Jha’s outlook is a conviction that US financial markets are significantly mispriced for the monetary policy tightening that lies ahead.
He believes the Federal Reserve needs to raise the federal funds rate by at least 50 basis points across the four remaining FOMC meetings of 2026 to bring inflation durably under control.
Money markets, by contrast, are currently pricing in only 35 to 50 basis points of hikes by year-end, with one 25 basis point move fully priced in and a second assigned significant but not certain probability.
That gap between market pricing and what Dr. Jha believes the Fed must do is, in his view, the fault line from which a broader market correction will emerge.
“US Treasury 10-year bond yields should be at least printing 4.6 to 4.8 per cent by now, since US money markets are underpriced for what the Fed needs to do to contain inflationary pressures,” he told TNS News.
“The USD should be at least 103 by now — as reflected in the DXY Index — which it isn’t.”
The adjustment, he argues, is inevitable.
US 10-year Treasury yields must rise to 4.6 to 4.8 per cent; money markets must fully price in at least a 50 basis point hike by year-end; and the DXY must climb to at least 105.
Once that repricing takes hold across fixed-income and currency markets, the pressure valve releases — and US equity markets will bear the brunt, with a correction of 10 per cent or more between June and August, and downside risks of 15 to 20 per cent.
The macro backdrop makes this more, not less, likely.
Dr. Jha projects the Fed’s preferred inflation measure, core PCE, to remain at 2.8 to 3.4 per cent, well above the central bank’s 2.0 per cent target even as the US economy continues to expand strongly over the next six to nine months.
Fed Chair Kevin Warsh, he notes, is “the right person to contain market volatility” and will not shy away from the tightening required.
The Ringgit’s Moment: USDMYR Seen at 3.90–4.10
For Malaysia, the picture that emerges from Dr. Jha’s analysis is notably more favourable than for many of its regional neighbours.
Despite his forecast of a stronger US dollar in the second half of 2026 with the DXY Index expected to trade in the 100 to 107 range, he sees the ringgit holding its own.
“I expect USDMYR to trade in a range of 3.90 to 4.10 in 2H26,” he said, citing a confluence of tailwinds that distinguishes Malaysia from more vulnerable emerging markets: ongoing fiscal reforms that continue to attract capital, accelerating foreign inflows to the equity and government bond markets, the MM2H programme drawing fresh investment into residential property, and an FDI pipeline that shows no sign of slowing.
The MYR is ranked alongside the Chinese renminbi (CNH) and Singapore dollar (SGD) as likely outperformers in Asia, while the Indonesian rupiah (IDR) and Indian rupee (INR) face the more challenging end of the depreciation spectrum.
Dr. Jha is neutral on the Japanese yen.
Crucially, he believes Malaysia’s domestic economy is structurally insulated from the worst of any external shock.
The primary engine of Malaysian growth is consumer spending, and most household labour income is derived domestically rather than from external sources, limiting the transmission of global market turbulence into the real economy.
“With my outlook for the US economy being quite strong over the next six to 12 months, the current resilient trajectory of Malaysian exports will remain intact well into early 2027,” he added.
KLCI at 1,900? Why Dr. Jha Remains Bullish on Malaysian Equities
Perhaps the most striking element of Dr. Jha’s Malaysia view is his KLCI target: 1,900 by end-2026 — a level that implies meaningful upside from current trading ranges and would represent a significant vote of confidence in the domestic market from foreign institutional investors.
“I am bullish on Malaysian equities,” he said plainly.
“I expect foreign institutional investors to drive the KLCI index up to around 1,900 by end-2026 as the banks, property and technology sector fundamentals continue to improve and GDP growth prints around 5.5 to 6.0 per cent in the next two years versus the trend GDP growth rate of around 4.0 to 4.5 per cent.”
Within his global equity allocation for 2H 2026, Malaysia is overweight alongside the United States, Hong Kong, Singapore, Taiwan and South Korea.
He is market weight on China and Japan, and underweight Europe, India, Indonesia, Thailand, the Philippines and most other emerging markets.
His recommendation: buy Malaysian banks, property and technology stocks on any dips during the third-quarter correction.
Asset Allocation: Buy the Dip, Favour Gold, Reduce Exposure to Bonds and Crypto
Despite his near-term caution on US equities, Dr. Jha’s broader asset allocation stance for the second half of 2026 is not defensive but it is strategic.
He remains overweight equities, gold and silver; market weight on cash and the US dollar; and underweight fixed income, Bitcoin and Ethereum.
The playbook for the coming correction is clear: build cash now, buy US and North Asia big technology stocks including the Magnificent Seven on dips in the third quarter, and accumulate gold and silver as they become attractive at lower levels.
On crypto, he is unambiguous: Bitcoin needs to fall well below US$50,000 before it warrants consideration.
The Hong Kong property sector is flagged as another buy-on-dip opportunity during the correction window, sitting alongside Malaysian banking, property and technology as the specific sectoral calls he is most confident in for the second half of the year.
The Storm and the Safe Harbour
The picture Dr. Jha paints is one of cautious optimism in the face of a foreseeable market adjustment.
The Fed will tighten more than markets expect. US equities will correct, sharply and possibly painfully. The dollar will strengthen. Fixed-income duration is a position to reduce, not add to.
But within that turbulence, Malaysia is positioned as a relative safe harbour, a market with a currency that outperforms, a growth trajectory that holds, an equity index with a credible path to 1,900, and a domestic economy that is structurally buffered against the worst that global repricing can deliver.
For investors, the message is not to run for the exits but it is to prepare for the dip, position in the right markets, and have the discipline to buy when others are selling.
- TNS NEWS