Turning views into action: Three themes for summer 2024

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Welcome to our midyear outlook. I’m Karim, from iShares, and in this video, I’m going to outline our latest views and where we see investment opportunities.

We think there’s a major structural transformation underway, with the potential to reshape the investment landscape. It’s being driven by a potential surge in business spending on artificial intelligence (AI), the rewiring of global supply chains, and the low-carbon transition. However, we think that uncertainty around the economic outlook and the size and speed of companies’ investments in these themes calls for a more nimble, granular approach to investing - that is, reassessing investment decisions more frequently and being alert to opportunities in specific countries or industries.

Our first theme is ‘going global to find opportunity’. We’re positive on UK stocks – particularly large, multinational companies - which seem relatively cheap and may benefit from their tilt towards industries such as energy and financial services, which we like in the current environment. That said, we also think it’s important for investors to look globally to find opportunities. US tech stocks have remained in focus amid continued excitement about AI and its potential benefits. We still like these companies, but we also see opportunities emerging in other markets, such as Japan, Europe and India.

Our second theme is ‘generating income’. Inflation has fallen in recent months, but not as fast or as far as many had expected. Meanwhile, economic growth has remained relatively resilient, so central banks haven’t been incentivised to try to boost activity. As a result, they’ve been slow to cut interest rates, and bond yields have therefore remained quite high and continue to offer income.

Our third theme is ‘AI: the next leg’. Interest in AI-related companies – particularly semiconductor manufacturers – has stayed strong this year. We still like semiconductor firms as a foundational play on AI, but we also look to the next leg, centred on the rapid growth of AI tools and the vast data sets required to train them. We think this opens opportunities in three key areas: protecting data and consumers from digital threats, building out the vast infrastructure required to support AI, and powering these new energy-hungry applications.

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