It’s unclear whether AI or large US tech leadership will continue, but market concentration is primarily a US phenomenon and less significant internationally. The opportunities from technological innovation are vast, and AI is a profound theme that warrants deep consideration. While AI is critical to many of our technology investments, its impact is also pivotal for other sectors. For example, AI could significantly enhance R&D efficiency for biopharmaceutical companies and revolutionize how consumer businesses sell to and service customers. The AI opportunity is both broad and nuanced. We’ve identified compelling opportunities in chip foundries, semiconductor equipment companies, AI software developers, and firms integrating these technologies to drive cost efficiencies and deepen customer engagement.
The new President will significantly influence both international and US markets. It's a complex situation with diverse considerations and scenarios. Trump is more experienced this time around and, as his cabinet nominees indicate, he aims to shock the system. Investors must navigate multiple layers of uncertainty, including the people, their roles and agendas, the scope of their mandates, and—importantly—the countermeasures from those affected, domestically or internationally. China is better prepared now and positioned to retaliate against any tariffs or export controls that Trump may put in place.
If we look at his first term, Trump’s rhetoric was more intense and exaggerated than his actual policies. While we recognize the risk to expecting people to act contrary to their stated intentions, we anticipate he will deliver pro-business, domestically focused policies that are more practical than headlines suggest. A less aggressive version of Trump’s US-first agenda could alleviate market tension and encourage risk-taking.
As inflation stabilizes, most major central banks, except Japan’s, are holding steady or easing financial conditions. The likelihood for a significant shift appears low, suggesting that company fundamentals could regain prominence in 2025. While macroeconomic changes, such as those to monetary policies, can trigger short-term share price volatility, a company’s fundamentals ultimately shapes its equity story. Therefore, we prioritize alignment with resilient business models capable of thriving in various environments.
International markets are inherently diverse, primarily comprising smaller economies that rely on healthy cross-border commerce to create value. Better outcomes are typically achieved in more peaceful environments, where geopolitical and economic cooperation is trending positively. Geopolitical stabilization across the US and China, Russia and Ukraine, the Middle East and elsewhere could offer upside versus current expectations.
For global investors, it’s crucial to recognize that international equities have comprised over half of all outperforming shares on a global basis. Modest international benchmark returns mask a rich landscape of diverse opportunity for active, fundamental investors. Irrespective of domicile, markets reward companies that compound their economic productivity. These companies often possess unique competitive advantages that are durable, monetizable, and supported by strong balance sheets. They also generate ample cash flow to reinvest for growth, even during periods of broader market stress. We remain optimistic about deploying capital internationally, adhering to our quality-first approach.
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