Year-end market rally fueled by fear of missing out on AI, says Man Group's Rowe

Market Overview - The market is experiencing a strong finish for the year, driven by AI, fear of missing out (FOMO), optimism around future rate cuts, and resilient consumer spending despite affordability stress [1] - Global equity markets are at highs, with stock and bond volatility at lows, indicating that global fundamentals appear stable [2] Economic Differentiation - The theme for 2026 is expected to highlight a "have and have not" scenario, with different economies performing variably and a separation from the "everything rally" [3] - There is a non-uniform fiscal and monetary policy globally, with interest rates decreasing in some regions while increasing in others [4] Investment Sentiment - Investors are becoming increasingly sensitive to the cost of capital, which is expected to play a significant role in the coming year [5] - There is a trend towards diversifying investments away from U.S. markets, particularly towards European defense spending and policy, which is creating constructive narratives [7] AI and Market Dynamics - The outperformance of non-U.S. markets this year looks promising on a one-year basis, although it appears less impressive over a five-year period [5] - The current investment climate resembles the late 1990s tech boom, where a diverse range of investments could yield significant returns if a few succeed [8] Precious Metals Insights - Gold is perceived as being overvalued, with the current gold-to-silver ratio at approximately 70 to 1, compared to a historical average of 10 to 1 [9] - The rally in gold is positively impacting the entire metal complex, with silver being closely aligned in value [10] - Gold serves multiple roles, including inflation defense and global diversification, with current investments in gold reflecting concerns about inflation and a lack of alternative investment options [11][12] Future Outlook - A shift in the narrative around gold and silver is anticipated once there is more certainty in the global economic framework [13] - The investment community is compelled to remain invested despite high valuations in U.S. equities, leading to a strong interest in gold as a viable investment option this year [14]