Summary
A strong economy – Despite recent geopolitical tailwinds, the global economy remains surprisingly robust. The global economic surprise index is only a whisker away from its 20-year highs (outside the post-COVID era). Purchasing manager indices are also pointing toward a healthy economic activity in the major countries.
Strong earnings – The Q2 earnings season provided very strong results. All major regions showed above average earnings growth. We expect this trend to continue given the tailwinds from the economy and AI.
AI the story continues - We remain optimistic that the adoption rates of AI will continue to climb higher. This is especially encouraging as there is ample room for higher spending among companies. This should motivate hyperscalers to continue spending on AI infrastructure. With more and efficient models available, token prices are declining. This, however, leads to increased demand rather than companies pocketing the savings - a real-life example of Jevon´s paradox
Europe – Winter is coming. At a first glance, economic data looks encouraging in Europe. Beneath the surface, we still see some risk though, especially from rising gas prices. on European earnings. For now, we tend to give Europe the benefit of the doubt and confirm our neutral stance. Given the risks, we would still recommend that investors engage selectively, focusing on sectors and companies with strong fundamental tailwinds.
A cheapening bull market – As Chart 1 is showing, equities got cheaper as the current bull market is progressing. A key distinction from the dot.com bubble.