Investors face a perilous period as US midterm elections open risks on AI and geopolitics. Global stocks rose just 2 percent since July, with the US market stagnating. While Big Tech bits remain popular, optimism surrounds Anthropic's potential public market debut this autumn.
Higher interest rates have weighed on cyclical sectors, leaving the S&P 500 up 12 percent year-to-date, but stripping tech cuts performance in half. The AI trade shows cracks; South Korea's Kospi index fell 40 percent since June peak. Concerns mount over lavish borrowing to fund data centre construction, spooking debt markets.
Analysts debate if failures to generate quick returns or rising borrowing costs drive the worry. Alphabet's quarterly earnings revealed AI mode searches cannibalize its advertising business, wiping $500 billion off its stock value, the second-biggest decline in history. The AI spending theme faces a grilling: too much debt risks instability, while pulling back signals the boom is over.
Wealth advisers urge spreading bets. Amid wobbly tech debt and drive-by assaults on big-name tech stocks, the US midterm elections on Tuesday add further uncertainty. Deutsche Bank notes 21 of the last 23 midterm years brought positive S&P 500 returns in the fourth quarter, averaging 7 percent, though a large Democratic majority could usher in a tougher regulatory agenda.
Source: Financial Times Markets · Summarized by HeadlinesBriefing