Helen Bradshaw

We cannot shy away from the ongoing discussions about AI and AI-related stocks - will they continue to grow and justify the current valuations? Associated to this is the concentration risk and imbalance in earnings in the market and whether that is a healthy investing environment. This also links to the discussions about the k-shaped economy and the difficulty for the US Federal Reserve to balance risks and monetary policy in the face of loose fiscal policy in the US.

Our view is that the market is expecting continued rate cuts, and we think there is a risk of inflation remaining stubbornly sticky or even increasing which could lead to a shift in these expectations. If that occurs, then the US debt sustainability question gains more traction and could impact on financial markets. In the shorter term, we expect the US administration to want the economy to run hot into the mid-term elections.

Closer to home, the UK does look cheap relative to other markets following a good year, but not so much relative to its own history (the story for lots of regions and sectors). We need to see signs of sustainable growth and the current data does not seem to be supporting that. While you could put that argument forward for Europe, we can see the potential impact of looser policy in Germany acting as a catalyst for industry and therefore economic growth.

We continue to maintain a focus on international diversification, with a preference for US diversification as well. While higher starting bond yields offer opportunities we retain a preference for diversifying into liquid alternatives.

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