What Bubble? Asset Managers in Risk-On Mode Stick With Stocks

Core Viewpoint - The optimism surrounding the artificial intelligence (AI) sector is significant, contributing trillions in market value, yet it is still in the early development phase [1] Investment Sentiment - Institutional investors are positioning for a risk-on environment through 2026, betting on resilient global growth, advancements in AI, and supportive monetary and fiscal policies [4][5] - A bullish outlook is prevalent among investment managers, with expectations of continued strong returns for the MSCI All-Country World Index, which has added $42 trillion in market capitalization since the end of 2022 [2][5] Technology Sector Insights - The majority of buy-side managers do not view the current technology market as a bubble, asserting that the fundamentals support the valuations of major tech companies [7][8] - Earnings from the tech sector have significantly outperformed other sectors, reinforcing the positive sentiment [8] Geographic Focus - The US is expected to remain a key driver of market rallies, with investors recognizing the potential for growth in other regions, including Europe and emerging markets [9][10][12] - India is highlighted as a compelling opportunity for 2026, with expectations of a market transition similar to that of South Korea [12][13] Sector Preferences - Investors are optimistic about small-cap stocks, particularly in industrials and financials, anticipating a rise in profitability as interest rates decline [15] - Healthcare sectors are viewed as attractive due to low valuations and potential upside, especially in the context of mid-term elections [16][17] Risks and Concerns - There are concerns regarding inflation resurgence in the US, which could negatively impact both stocks and bonds [18] - Trade tensions and geopolitical events, particularly those affecting oil prices, are seen as potential risks to market stability [19][20]