Global economy has been incredibly resilient to shocks like tariffs; US growth above 2%, Europe growing, Japan recovering, China fine. Earnings doing very well, so being bearish too soon doesn't pay off.

Every shock we've seen globally, especially Tariffs day and last year, the US economy has been incredibly resilient. Everybody expected big impact on inflation and labor market, but reality is different.

AI boom is real increase in investment spending driving economic data higher. Wealth creation from last few years gives people more money to spend. Consumer confidence is at all-time low but GDP remains solid.

Consumer confidence in US is even worse than in 70s, 80s, lower than 2020. People are clearly worried, inflation picking up, but GDP indicator still very solid.

US market P/E of 21 vs long-term average 17-18, but corporate sector is incredibly profitable with 25% earnings growth, record margins, buybacks, tax effects. Not cheap but not incredibly expensive. Some consumer stocks show excessive valuation, tech looks expensive but justified if AI capex continues.

The fundamental story is very solid. Valuation element is negative but not enough to offset all the other positives.

AI/data center investment close to $1 trillion in US this year. Over next 5 years sustainable; no significant slowdown next 6-12 months given top tech commitments. Capex story will broaden to other sectors like industrials, supporting growth for at least next year.

The question will be whether other sectors benefit from this. Our view is that this capex story will get a little bit broader.

Margins at all-time highs not just in US but globally. Driven by real pricing power in uncompetitive industries, decline in real wage costs, buybacks. Political backlash possible but not yet translating into anti-business policies. Earnings growth of 20% next year is too high, but still well above historical norm.

There must be something else - real pricing power, a lot of industries are effectively not very competitive with just a few major players that can dictate prices.

Equity returns historically 5-10%, we've gotten used to 10-20%. With low risk premia, cannot expect significant returns next 5-10 years unless new world of low inflation/AI pushing growth 3-4%. Significant convergence across regions: US gets worse, Europe better. Returns will converge below historical norm, more spread out. US being the only place to invest is probably over.

When we look at our indicators in terms of valuation, expected growth, monetary policy, there is significant convergence across different regions.

Yes, diversify away from US not because US will do badly but due to risk: passive UK investor ends up with 70% in non-currency market with currency, political, sector risk (tech dominated). Equal weight approach or even bias helps. Fixed income now attractive for first time in decade - UK gilts yielding 5-6% in real terms, similar to India. UK fiscal position better than perceived (IMF sees primary surplus in 2 years). Good value in gilts.

The expected returns on fixed income are actually quite attractive, not only in the UK, also in the US. I think maybe it's time also to put some money back into fixed income.

US still best bet near-term: good economy, potential rate cuts, 25% earnings growth. Emerging markets also attractive (rate cuts, cheap currencies, good valuation). Over 5-10 years, Europe has a case: Germany will spend more, cheap valuation, integration reforms. Europe/UK trade at too wide a discount to US.

Europe is kind of, especially Germany is going to spend more, cheap valuation. I think we also feel more optimistic than others on the integration story reforms.

Don't believe in commodity supercycle. Last one driven by China real estate investment, current capex less commodity intensive. Gold set to increase but not at same pace (dollar already depreciated, limited downside in rates). Oil trending down unless Middle East worsens. Most interesting is industrial metals: critical for green transition, limited supply, strong momentum. Commodities position required as inflation hedge.

Industrial metals trade at all-time high. You can claim that industrial metals are critical in the green transition, there is limited supply, strong momentum.

Europe imports 3% of GDP in energy, significant but oil prices expected to decline and renewables growing. Europe could be energy independent by 2040. Worry is Europe needs another existential crisis for real reforms. Real political risk is more in US: US debt-to-GDP 20% higher than 10 years ago, exponential trend with no sign of change. US is still safest but not as safe as before. Even small diversification away from US by foreign investors has huge implications for bond yields and equity valuations.

The US is where you see an exponential increase in public debt, not in Europe. There is no sign of this being changed.

US is less trustworthy than before. Perception that US is not the safest place - still safest but not as good. If investors worry about dollar depreciation or Fed losing independence, that could trigger fiscal crisis. We don't see this happening but it's a risk.

When you are very dependent on foreign capital, you cannot treat foreign investors in the wrong way. And that's the perception - the US is not the safest place.

Real problems are the ones we can't predict (like COVID). Biggest risk: we are too dependent on stock market for wealth creation. A disruptive force creating a big market shock would have huge implications for growth. Correlation has changed - market shock affecting economy rather than other way around. Relatively optimistic things hold together but lower returns next 10 years. 7% equity return with 3% inflation is not bad. 20% returns not sustainable and would increase inequality and populism.

We had basically 10 or 20 years of superior returns. I think this is not going to happen again. If you have 7% return on equities and inflation is 3, it's not bad.