The “Top Questions from our Clients” publication is a monthly periodical that posits the most important questions,  answers, and portfolio implications curated from across different regions. The October edition addresses the below topics:

• Question 1: Almost every company today says it benefits from AI. How do we identify the real winners from the hype? AI is increasingly disrupting our society, creating short-term volatility as well as a vast set of opportunities. We expand our horizon into the wider ecosystem to include AI enablers, who are creating the infrastructure to support AI; and beneficiaries who are in full throttle to implement AI in their products and services and benefit from the productivity gains. Stock picking is key, with the largest companies benefiting from greater resources to invest, but some smaller players potentially benefiting from being nimble. Practically speaking, we remain overweight on: IT considering the demand for data centres, cloud services, semiconductors etc.; Industrials, catering to the demand for infrastructure to support technology development (cable wires, electrical equipment, and buildings); and Utilities providing the needed electricity and water
• Question 2: Is the Fed’s September rate cut the start of an aggressive easing cycle or a one-off move? The Fed’s 25bps rate cut earlier this week marks what we anticipate is the start of a gradual easing cycle. Contrary to the markets pricing a more aggressive easing, we foresee two more cuts of 25bps in December and March 2026. The Fed messaging suggests the FOMC will remain data-dependent and won’t commit to a pre-defined path. Recent labour market weakness could increase the likelihood of further rate cuts beyond our forecasts. The Fed restarting its easing cycle has historically been positive for both US equities and bonds, and hence we remain overweight on US equities, supported by AI-led innovation and strong earnings. We also remain mildly overweight on US corporate IG bonds with medium-to-long duration
• Question 3: Should I worry about debt sustainability or is the move in long-dated bond yields exaggerated? Recent spikes in long-dated yields show investors are seeking higher premia and worry about fiscal credibility. The UK has been in the spotlight and credible fiscal signals in the upcoming budget are critical to curb volatility in gilts. US Treasuries remain better placed, given the dollar’s reserve currency status and Treasury market’s deep liquidity, though medium-term fiscal clarity is crucial. In the Eurozone, German Bunds remain a safe anchor, while Italy and France face heavier debt-servicing pressures. Japan is cushioned by low funding costs, while select EM LC debt offers opportunities where stronger growth and reforms underpin sustainability. While debt sustainability matters, long-dated bond yields are benefiting from Fed cuts, which has helped yields to fall back a bit. Gold and infrastructure investment can help address excessive debt concerns
• Question 4:  How will the Fed’s September cut impact other central banks and global markets? The Fed’s move does impact other central banks’ decisions. However, given that this is a restart of a pre-existing easing cycle, and other major economies are at different stages with their growth and inflation dynamics, the impact on other central banks may not be substantial. The ECB seems to be done with rate cuts as inflation is on target. The BoE, on the other hand is yet to deliver more rate cuts, but has turned more gradual in its approach due to local factors, while China is relying more on fiscal and monetary stimulus to stabilise growth. These rate cuts should be beneficial for various sectors, particularly Financials, as steepening yield curves should benefit banks’ revenues. We also like Tech, but diversify into Industrials, Financials, and Communication Services. We overweight developed market IG bonds (outside of Japan) with medium-to-long duration. In FX, we think the Fed cuts argue in favour of continued currency diversification
• Question 5: Can gold sustain its upward momentum? Gold has returned 38 per cent year-to-date, as it continues to reach new all-time highs. A weakening USD, falling bond yields, strong ETF buying, continued central bank purchases, and safe haven demand amid ongoing economic and geopolitical uncertainty are the major drivers for the yellow metal’s uptrend. Looking ahead, in our view, gold buying should remain supported from concerns around the Fed’s independence. Sticky inflation and further Fed rate cuts would result in declining real interest rates, while gold can act as a hedge against purchasing power erosion, apart from its diversification benefits. We remain overweight on gold for all of these reasons
• Question 6: Should we book profits in US equities, given the high valuations, to rotate into cheaper markets in Europe? European equities remain inexpensive vs their US counterparts, yet valuations are not a good predictor of short-term relative returns. European growth and earnings challenges remain: domestically focussed companies face headwinds from sluggish economic growth, while a strengthening euro and trade frictions are obstacles for global corporates. Defence and infrastructure spending in the EU and Germany can be catalysts in the longer term but political uncertainty and weak sentiment should limit near term outperformance. For now, European and UK equities offer diversification benefits, and hence we remain neutral here, but have a preference for periphery vs core Europe. Instead of Europe, we prefer China and Singapore, where we are overweight. Within Europe, we see selective opportunities in Financials, Industrials, and Utilities