JunLi Henderson: The U.S. is unlikely to benefit from interest rate cuts, and expectations for a rising stock market are damaged
Junli Henderson pointed out that the U.S. is struggling to gain support for interest rate cuts, small-cap stocks have lost their financing advantages, and expectations for a stock market rise have been damaged. Although the market is overly concentrated and the environment is complex, the AI infrastructure bottleneck and oversold stocks in the software industry provide investment opportunities. Inflationary pressures persist, and the Bank of England or the European Central Bank may raise interest rates. European defense spending remains a lasting theme, while China's AI and biotechnology sectors are performing impressively
According to the Zhitong Finance APP, Lucas Klein, Head of European, Middle Eastern and African and Asia-Pacific Equities at Junli Henderson Investment, and Marc Pinto, Head of Americas Equities, commented that the market is overly concentrated. The team is more cautious than six months ago but believes that the complex environment creates opportunities for actively uncovering mispriced assets.
The company pointed out that there is a supply-demand imbalance in AI infrastructure, with bottlenecks in GPUs, CPUs, memory chips, and energy, leading to a strong upward revision cycle in profit forecasts, thus providing more investment entry points. Additionally, the AI software industry has experienced a sharp decline followed by a slow recovery, and oversold stocks may present opportunities.
Regarding energy prices, the company noted that although oil prices have retreated from their highs, inflationary pressures are expected to persist until the end of the year, with consumption and profits in European or Asian importing countries under pressure, and U.S. consumer spending also showing signs of fatigue. In terms of monetary policy, the Bank of England or the European Central Bank may be forced to raise interest rates; the U.S. is unlikely to benefit from rate cuts, and the financing advantages for small-cap stocks may be lost, damaging expectations for stock market gains.
As for regional divisions, reforms in Europe are stagnant, but defense spending (tanks and banks) has become a lasting theme, with valuation discounts narrowing. Investment in Europe can still be accessed through multinational companies involved in global profits. China benefits from the central government's relaxation of regulations on the private sector, with bright innovations in AI, biotechnology, and electric vehicles.
The company believes that the long-term productivity gains from AI are relatively resilient against cyclical headwinds such as inflation, interest rate hikes, and geopolitical conflicts, all of which do not follow a predetermined trajectory, and volatility will continue. Close attention must be paid to the impact of AI on the workforce, the digestion of IPOs, and the resilience of high-end consumption
