Our positioning: From AI euphoria to critical differentiation

The stock markets began the year with strong returns. Neither the geopolitical turbulence, including the threatened annexation of Greenland, nor the political tensions surrounding the US Federal Reserve triggered by criminal investigations into the current Fed chair, had any lasting dampening effect on the markets’ positive mood. But things have changed since then. Investors are increasingly asking who will actually be among the winners in the AI race. The first signs of this scepticism came in October last year during the third-quarter earnings season, when AI investment continued to rise sharply while the economic benefits remained unclear. This led to faltering momentum among AI companies in the USA.

Euphoria gives way to critical differentiation

In the current reporting season, too, the markets have generally reacted negatively to announcements of high levels of AI investment. One example is Amazon, which announced investments of around 200 billion US dollars in the expansion of its AI capacities. Although its overall business numbers were sound, the stock has since lost more than 15 percent of its value. Elsewhere, Anthropic drew the market’s attention with the launch of a new AI model that can be integrated into existing software environments and is capable of performing complex knowledge-intensive tasks. This puts it in direct competition with software providers in areas such as law, finance and consulting.

Value stocks performing well this year

The US stock markets in particular suffered from these developments, especially the S&P 500 index. US software stocks were hardest hit, falling almost 20 percent since the beginning of the year. By contrast, more broadly diversified global value stocks did very well, outperforming the leading American index, the S&P 500, by around 3 percentage points. This comes as no surprise to us. We’ve long been sceptical about the tech-heavy and concentrated US stock market, and instead prefer broader diversification in global value stocks. This position has paid off in recent months. We expect this trend to continue and are sticking to our position.

Gold and emerging market investments preferred

Alongside global value stocks, we see emerging market investments as particularly attractive. This view is underpinned by the generally more robust economic situation in the relevant economies. More importantly we see these investments as likely beneficiaries of the US dollar’s expected continued weakness. Gold should also continue to be bolstered by this environment, as a hedge against crisis and inflation. Although the precious metal has been highly volatile in the past month, we remain convinced of its structurally supportive factors. The gold price is likely to find support from a weaker US dollar as well as ongoing difficult geopolitical and trade conditions and continuing above-average US inflation. With this in mind, we’re remaining overweighted here. We’re also keeping our overweight in Swiss real estate funds, as they still look attractive compared to money market investments in the current low interest rate environment.

Performance of asset classes

Our positioning – Swiss focus