By: Graham Wainer
The global economy remains in a modest expansion following positive growth surprises in the US, Europe and China in the first half of the year.
While consensus has shifted from imminent US recession to an assumption that it has been avoided completely, we are reluctant to draw the same conclusion. Not only are there signs that US growth is starting to wane, but the combination of broadly sanguine investor sentiment and layers of macro uncertainty give us pause.
The second half of the year offers notable political and geopolitical shifts, culminating in the US presidential election, with former President Trump now considered the frontrunner by many polls.
As long-term investors, we retain allocation to equities, which continue to be supported by lower inflation, central bank easing and impressive earnings growth. We reflect a cautious stance in our multi-asset strategy by tilting towards more defensive equity sectors and allocating to the diversifying components of fixed income and alternative assets.
The revenue conversion from AI has been huge for a small number of large technology businesses. In contrast to the dotcom bubble of the 1990s, we are reassured that the significant share price gains delivered by AI enablers and early adopters are justified by operational performance. Although we retain meaningful exposure to these trends, we seek to manage concentration risks and ensure a robust strategy by diversifying into other compelling opportunities.
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