The last few years have given investors no shortage of competing narratives to wrestle with. AI optimism, stubborn inflation, geopolitical tensions, slowing growth, higher interest rates, and now renewed concerns around oil prices and the Middle East.
For Chris Watling from Longview Economics, however, the story underneath markets may actually be much narrower than many investors realise.
Watling argued that much of the apparent strength in the US economy and equity market remains heavily tied to the AI theme, from earnings growth through to capital expenditure and profit margins.
“All of that is about the AI theme.”
That concentration leaves markets vulnerable if enthusiasm around AI eventually fades before broader economic growth properly reaccelerates.
Discussing global energy markets, Watling said the US is still playing a major role in offsetting supply disruptions.
“At the moment, the pinch is being made up mainly by what you're seeing in the States.”
In the full episode of The Rules of Investing, Watling discusses why he believes markets may be underestimating economic fragility beneath the AI boom, along with the outlook for inflation, oil, rates, housing and global growth.
To watch full episode, click here