Market outlook amid geopolitical uncertainty and AI (with Haidi Stroud-Watts)

What are you seeing in terms of low volatility in international stocks despite geopolitical uncertainty?

Haidi Stroud-Watts

Jambalio

The market has taken a view that a path through will be found. The market is trading with inflation expectations. As long as oil prices fall, the market will move forward. We are waiting for the final outcome on oil, and if it happens, we will see a risk rally across the board.

The market seems to want to find a reason to go up, buying every possible outcome.

Even if there is an agreement, it might take time for oil prices to normalize, and there might be a toll system for vessels.

Haidi Stroud-Watts

Jambalio

The market wants to see ships go through the Strait. Whether there is a toll or not, the short-term effect is not significant. The market is looking past negativity. The key question is whether oil will fall quickly. If a toll is imposed, oil might remain elevated due to backlog and price increases already passed through by manufacturers.

Price pressures are likely to remain elevated and will have real economic consequences.

There is also the inflationary risk of AI due to massive infrastructure investment. How does that play into things, and do you look for diversification?

Haidi Stroud-Watts

Jambalio

AI thematics are real. All the hyperscale investment and demand for energy is real. We prefer to play in the picks and shovels space where demand is guaranteed for years. In Australia, we see opportunities in minerals (copper, aluminum), engineering, and data center suppliers. Many of these companies are still small, representing the next wave of growth.

The AI leader might power on, but there are risks over the long period. We prefer the picks and shovels space.

What are you liking in China right now?

Haidi Stroud-Watts

Jambalio

We continue to like areas where the government is focusing: technology, AI, and electrification. Consumer in China is not doing too badly, with housing stabilizing and consumers traveling. We just need to see real income growth for another couple of quarters. Globally, the consumer sector is going to be a tough spot.

Commodities and industrial businesses doing well generally means more inflationary pressure and pressure on consumer spending.

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