Investing

AI is quietly reshaping the cost base of the US economy by replacing labour and making processes more efficient. In services in particular, this is reducing unit labour costs and easing inflationary pressures. The bond market, however, has yet to fully recognise the policy room this creates for the Federal Reserve.

Systematische beleggingsstrategieën profiteren van het toenemende ‘alledaagse’ gebruik van AI, in het bijzonder de grote taalmodellen zoals ChatGPT. Mede daarom kunnen die strategieën nu makkelijker hun weg vinden naar het wealth-segment, signaleert Adam Riley van Blackrock: ‘Als mensen de technologie zelf gebruiken, begrijpen ze de kracht ervan beter.’

Markets are pricing a world that may no longer exist. Democratic institutions, designed for slower cycles and contained economies, are struggling to govern the complexity they now face. That failure, argues economist Jeannette von Wolfersdorff, is already shaping the conditions under which capital is allocated and regulated.

Eastern Europe has been growing faster than the West for years. Western European companies are benefiting from that growth through large-scale factory investments. International investors, however, have completely missed the bull market. They left after the war in Ukraine and have not returned. According to analysts at Fidelity International and Karoll Capital, it is time to come back.

The way capital flows is changing. Alongside banks and traditional networks, digital platforms are increasingly claiming a prominent place in this chain. This shift is altering access points to markets and strengthening the role of standardized products in portfolio construction, such as ETFs.

Investors seeking to diversify their portfolios and reduce dependence on traditional equity indices are increasingly turning to private markets. However, through their public holdings they already have exposure to those same markets. The additional costs associated with private funds do not structurally deliver higher returns.

The unrest in the Middle East has affected Emerging Market Debt (EMD) through rising rates and higher risk premiums. There is no indication, for now, of a structural deterioration in credit risk.

The fact that some bond issuances are now oversubscribed by as much as ten times illustrates how sharply market sentiment has shifted. After more than a decade of interest rates close to zero, bonds in the eurozone are once again offering returns, around 3 to 4 percent for investment grade.

The conflict between the US and Iran is hitting the core of the Federal Reserve’s rate strategy. The one factor that was keeping rate cuts alive, falling housing costs, is now under pressure. Fed governor Stephen Miran’s bet that housing costs would keep falling fast enough to justify lower Fed rates is now being tested in the worst possible way.

The health care sector continues to lag behind the broader equity market, but according to sector analysts, investor pessimism is overdone. Innovation, improving earnings growth, and declining political risks could give the sector renewed momentum in the coming years.