Jan 26 (Reuters) - Spending on artificial intelligence by large corporations will continue to grow exponentially and reshape the economy, ​Bridgewater Associates' co-chief investment officers said in a client note ‌on Monday. AI has emerged as the key driver of global corporate investment and a ‌central force behind the market rally, altering capital spending plans across industries. A surge in corporate spending across the AI supply chain, from data center infrastructure to chips and power, has helped ...

US stocks got clobbered on Tuesday in Wall Street's worst day since October, returning to the kind of tariff-fueled routs that plagued markets last spring after President Trump reignited trade-war tensions with Europe over his ambitions to take control of Greenland. The Dow Jones Industrial Average (^DJI) sank 1.8%, or over 800 points. The S&P 500 (^GSPC) fell by about 2%, while the Nasdaq Composite (^IXIC) retreated over 2.4% as investors fled riskier bets on the heels of a losing week for Wall Street st ...

Neils ChristensenNeils Christensen has a diploma in journalism from Lethbridge College and has more than a decade of reporting experience working for news organizations throughout Canada. His experiences include covering territorial and federal politics in Nunavut, Canada. He has worked exclusively within the financial sector since 2007, when he started with the Canadian Economic Press. Neils can be contacted at: 1 866 925 4826 ext. 1526 nchristensen at kitco.com @Neils_cShareDisclaimer: The views expressed ...

Warren Buffett has spent decades urging investors to separate a company’s underlying economics from the market’s shifting enthusiasm. In Berkshire Hathaway’s (BRK.B) (BRK.A) 1993 shareholder letter, the CEO revisited a theme that runs through much of his writing: in the short term, stock prices can depart sharply from the progress of the businesses they represent. That performance gap, he suggested, can persist long enough to tempt investors into confusing momentum with durability — even though it rarely b ...

Core Viewpoint - The recent surge in US technology stocks, particularly those associated with artificial intelligence, raises concerns about the potential formation of a market bubble, especially for Indian investors heavily exposed to US equities [1][2]. Group 1: Market Dynamics - The US market rally is increasingly narrow, driven by a small group of AI-linked mega-cap companies, with 10 US stocks each holding a market cap over $1 trillion [3]. - AI-related firms contributed nearly 80% of US equity gains in 2025, with the five largest AI mega-caps making up about 30% of the S&P 500 and 20% of the MSCI World Index, marking the highest concentration in nearly 50 years [4]. - The US technology sector now represents around 35% of total US market capitalization, with the 10 largest US companies accounting for over 20% of global equity value, indicating an extraordinary historical dominance [5]. Group 2: Valuation Concerns - The S&P 500 is trading at approximately 23 times forward earnings, suggesting one of the most stretched valuation phases since the dot-com boom [6]. - Despite high valuations, analysts argue that the US tech sector is not in a classic bubble, as some companies continue to generate strong cash flows that support their valuations [7][8]. - A Deutsche Bank report highlights that the rise in AI-driven valuations is accompanied by real earnings growth and robust profitability, contrasting with previous bubbles fueled by unproven business models [9]. Group 3: Risks for Indian Investors - Indian investors face unique risks due to their heavy reliance on US markets, with potential double-layered risks during a US market correction [10][11]. - The current market environment suggests that Indian investors should diversify globally rather than remain overly concentrated in US equities [10][12]. - Valuation opportunities outside the US appear more balanced, with Europe and Japan identified as attractive regions for investment [13][14]. Group 4: Investment Strategies - Indian investors are encouraged to diversify across developed markets like Europe and Japan, with a suggested allocation of 80% to these regions and 20% to emerging markets like Brazil [16]. - Mutual fund data indicates a growing trend among Indian investors to rebalance their portfolios towards non-US geographies, with significant growth in AUM for international funds outside the US [17]. - Experts recommend using mutual funds or ETFs for international exposure, as they provide better risk control and simpler taxation compared to direct stock ownership [21][22].

Group 1 - Seasonality in the market can be unpredictable, with December being noted as one of the best months historically, but it does not guarantee positive outcomes every year [1][2] - November was a challenging month, with minimal trading volume and a late-month rally barely pushing the market into positive territory [2][3] - Current S&P 500 price targets for 2026 average at 7580, indicating a generally bullish outlook among banks [3] Group 2 - There is a prevailing consensus that AI will lead to significant profitability, but skepticism exists regarding the actual financial outcomes for companies investing heavily in this technology [6] - The current market sentiment suggests that the easy profits have already been realized, indicating a potential retrenchment in certain sectors, reminiscent of the internet bandwidth buildout [7] - The healthcare sector performed well recently, and there is an expectation that the market will broaden beyond a few leading stocks, allowing for a more diverse investment landscape [8][9] Group 3 - Investors are encouraged to focus on companies with solid earnings, dividends, and cash flows rather than speculative hype, as this approach is deemed more sustainable [11] - The market is currently experiencing a shift where investors are looking beyond a small group of dominant stocks, which is seen as a positive development [10]

Core Viewpoint - Ray Dalio, founder of Bridgewater Associates, asserts that markets are "definitely" in a bubble, although the bubble has not yet been pricked [1][6]. Market Conditions - Major stock market indexes have recently declined, losing gains made after Nvidia's earnings report, which initially eased concerns about the AI rally [1][3]. - Dalio emphasizes that the bursting of a bubble is not triggered by a single company's performance but rather by a collective decision among investors to convert inflated asset values into cash [3][4]. Investment Recommendations - While Dalio does not advise selling due to the existence of a bubble, he suggests protective measures such as owning gold and reducing significant credit exposures [4][6]. - The current ratio of U.S. equity wealth to total money is comparable to historical peaks before major market crashes, indicating potential for low real returns in stocks over the next decade [4][5]. Future Outlook - GMO's 7-year forecast indicates negative real returns for U.S. large- and small-cap stocks as of the end of September, aligning with Dalio's predictions of minimal future stock appreciation [5][7].

Core Viewpoint - The current market situation is compared to the dot-com bubble, indicating that it is approximately 80% of the way to a similar state [1] Group 1 - The founder of Bridgewater Associates, a hedge fund, provides insights on the market's trajectory [1]

Market Outlook - The market is not in a traditional bubble, as people tend to expect history to repeat itself, but the market often has different plans [3] - The greatest call was the secular decline in interest rates, which is believed to be back [4] - Short-term interest rates would be between 1% and 2% without the Fed's intervention [3] Economic Factors - Demographics are a strong reason for the current yield curve, as aging societies save more [7] - Older populations save more, exemplified by Japan and Germany, where savings exceed investment [8][9] - The US has $170 trillion in financial assets against a $30 trillion economy, making it difficult to sustain high interest rates [10] - Private debt is contracting at 2% per year relative to GDP, impacting the banking system [14] Investment Strategy - A massive shift in corporate sector ownership from debt holders to shareholders is expected as debt decreases [14][15] - Equities are expected to benefit as debt stock unwinds [16] - Productivity gains from AI are already visible, with hours worked down about 2% from 2019 while real GDP is up 13% [17] Technology Sector - The corporate sector is generating free cash flow late in the cycle [17] - Hyperscalers may not make money directly from large language models but will offer low-cost software packages [22]

Core Viewpoint - Gold has experienced a significant increase of 45.2% since November 5, 2024, marking a record for the year following a presidential election, with expectations for continued gains based on historical trends [3][6]. Group 1: Gold Price Performance - Gold's price surge of 45.2% since November 5, 2024, surpasses previous records set during the Obama and Carter administrations, which saw gains of 43.6% and 31.8% respectively [3][6]. - The price of gold attempted to break the $4,000 level, settling at $3,992.90, with 49 new records established in the past 10 months [7]. Group 2: Factors Driving Gold Prices - Anticipation of swift interest rate cuts by the Federal Reserve in 2025 has contributed to the rally in gold prices, enhancing its appeal compared to other safe-haven assets [4][6]. - Increased demand for gold from global central banks and private investors, particularly in China and Japan, has positively influenced gold prices [4][6]. Group 3: Political Influence - President Trump's criticism of the Federal Reserve and calls for lower interest rates have driven investors towards gold as a safe haven, amid geopolitical uncertainties [5][6]. Group 4: Future Projections - Despite the current surge in gold prices, Capital Economics forecasts a decline to $3,500 per ounce by the end of 2026, suggesting that the current market may be experiencing a bubble [6].