Key take-aways from our webinar: Can the bull market weather the flurry of news headlines?

Highlights: At our webinar, we discussed the recent market volatility, which has picked up in recent days as some investors wonder whether AI is in ‘bubble territory’. Renewed trade tensions between the US and China also create uncertainty. While these and other headlines could lead to some volatility in the short term, which needs to be managed, we remain positive on risk assets thanks to a constructive earnings outlook, ongoing rapid AI innovation and further Fed rate cuts.

• Is AI in bubble territory? Most large cap tech companies have seen their stock prices rise as a result of earnings growth, not sharp multiple expansion. And while investment in datacentres is huge, it is underpinned by rapid continued growth of the cloud and end-user demand for AI. We address concerns over ROI and circular deals but point to less risky options across the AI ecosystem, in infrastructure and utilities for those investors who are more cautious
• What will be the impact of the new US-China trade tensions? Markets are taking a relatively benign view, as the US and China will probably negotiate and because the trade tensions are ‘only’ between those two nations, which contrasts with the global tariff hit on Liberation Day. As a result, volatility is less than half the level observed in April. Still, to manage trade risks, we favour China’s domestically focused tech companies and income opportunities
• Are there risks around the Fed and government deficits? The Fed has changed its focus from inflation to growth risks and should cut two more times this year. The US deficit has already pushed up risk premia for longer maturities, so we want to lock in the good value in bonds. That said, we have a clear preference for investment grade over high yield
• Should we worry about private credit? The recent headlines are idiosyncratic rather than systemic as both public and private market delinquencies remain low and rate cuts should help. We emphasise manager selection with a preference for large managers and diversification, and investments directed to those companies supported by strong cash flows

To access the recording, please reach out to your Relationship Manager or Investment Counsellor