AI rally's first setback "overdue" - DWS CIO
- STOXX 600 up 0.8%
- Real estate, miners lead
- Wall St futures edge up
AI RALLY'S FIRST SETBACK "OVERDUE" - DWS CIO
The euphoria surrounding AI - and ensuing U.S. stock market rally - has had its first setback, which according to DWS CIO Björn Jesch was overdue.
"Investors are starting to re-discover the old but not obsolete virtue of diversification,” he said in an outlook piece.
The rotation out of mega-caps and into small and mid-caps began the second half of July, but it remains to be seen whether it will persist.
The small-cap segment of the U.S. stock market might also have felt the benefits from speculation about lower corporate taxes should Donald Trump win November's presidential election, says Jesch.
When it comes to sectors, he favours health.
"Health stocks should benefit from a lasting rotation towards growth and innovation, beyond AI," said Jesch, adding that valuations in the space are reasonable.
He highlights U.S. biotech corporations as potential beneficiaries of lower interest rates as financing will become cheaper.
The team at DWS meanwhile have upgraded investment-grade bonds after the recent setback in markets. Jesch sees less potential in European high-yield bonds.
(Lucy Raitano)
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STOXX 600 SET FOR FURTHER 10% DRAWDOWN - BOFA CLICK HERE
EUROPEAN SHARES TURN POSITIVE FOR THE WEEK CLICK HERE
EUROPEAN STOCK FUTURES EDGE UP CLICK HERE
TURBULENT WEEK ENDING ON A HIGH CLICK HERE
