Transformation underway

Historical trends are being permanently broken in real time as mega forces, like the rise of artificial intelligence (AI), transform economies. The ongoing outsized response of long-term assets to short-term news shows how unusual this environment is. We stay risk-on as we look for transformation beneficiaries – and go further overweight U.S. stocks as the AI theme broadens out. We have more conviction inflation and interest rates will stay above pre-pandemic levels.

2024 has reinforced our view that we are not in a business cycle: AI has been a major market driver, inflation fell without a growth slowdown and typical recession signals failed. Volatility surged and narratives flipflopped as markets viewed…