Recorded at 10 a.m. in London on Friday 3rd July
In this “Fireside Chat,” Gavyn Davies, Founder and Executive Chairman and Andy Bevan, Partner and Economic Advisor, discuss the following:
- US equity indices finished the first half of the year close to highs, despite a challenging macro environment, boosted by the performance of AI-related stocks
- Our test statistics have frequently indicated the Nasdaq price index in bubble territory, but this is not true of the forward-looking P/E ratio because of similar bubble-like earnings expectations
- AI-related stocks now have a significant market-cap weighting of about 40% in the S&P500 and there are indications of crowded positioning particularly in the memory sector, calling for a more nuanced stance in investment strategy
- The overall nonfinancial corporate sector remains in very robust shape with high profit margins and no overall reliance on external funding, but the capex intentions and bond issuance of hyperscalers is starting to cause some jitters about the outlook for credit fundamentals
- Fed Chair Warsh this week repeated his view that AI is boosting demand in the economy but ultimately will boost productivity and be a disinflationary force
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