The current investment landscape is characterized by a slowdown due to the prolonged period of high interest rates, which has started to weigh on economic activity, particularly influencing the consumer spending, the dinvestment decisions and corporate profits. He explains it Anis Lahlou, Chief Investment Officer European Equities of Aperture Investors, part of Generali Investments underlining that sectors such as automotive, industrial and China have shown signs of stress, although broader macroeconomic data does not yet reflect significant weakness.
Economic prospects and role of Central Banks
We see crucial support from part of the central banks: The Federal Reserve and Chinese authorities stand ready to provide support if economic conditions worsen dramatically. Historically, when central banks panic, it often creates a significant buy signal for stocks, as policy responses tend to stabilize markets and foster new growth.
It is likely that i interest rates fall, but the pace and timing will depend on inflation dynamics, labor market conditions and the global economic environment. Chinese authorities’ willingness to do “whatever it takes” to stabilize their economy signals a readiness for coordinated stimulus, which could be a game-changer. The combination of policy supports from two of the world’s largest economies and the natural closeness of the business cycle suggests that opportunities are often just around the corner, especially in a volatile environment.
However – explains the expert – the geopolitical uncertainties further complicate the prospectsand, with potential impacts on supply chains, energy prices and investor confidence. Heightening tensions in the Middle East have renewed concerns about oil prices, which could hamper global growth. Additionally, the upcoming US elections add to the sense of unpredictability, making it difficult for CEOs and CIOs to make meaningful investment decisions ahead of such political events. This uncertainty represents a headwind for risk, but it also creates opportunities for long-term investors willing to endure volatility.
AI winter, pause driven by macroeconomics
The expression emerged “winter of Artificial Intelligence”, but we believe this reflects more of the current macroeconomic environment than a true slowdown in technological progress. The cyclical decline in the consumer, automotive and industrial sectors has impacted the semiconductor industry, which in turn has influenced AI-related stocks.
Apple and Intel together they represent approx 20% of the profits of the semiconductor ecosystemwhich is comparable to Saudi Arabia’s role in the oil industry, and highlights the significant impact these companies have on the semiconductor complex.
In summary, i semiconductors are hit by an economic slowdown not because of an “AI winter,” but because of their strong connection to cyclical markets. However, this phenomenon is transitory and AI fundamentals remain promising. Innovations like ChatGPT’s new capabilities—real-time voice, memory, and application programming interfaces (APIs)—show the potential of AI to transform industries. Wider adoption of AI is expected, starting with modernization and automation efforts already underway. In challenging times, we often witness the resilience and innovation of companies as they adapt to changing environments, resulting in increased margins, improved competitiveness and higher returns on equity (ROE).
Don’t slow down technological progress
For example, Rockwool (ROCKB DC), a Danish leader in insulation and sustainable building materials, is deeply involved in eco-friendly construction and renovation initiatives, such as improving energy efficiency and fire safety in residential and commercial buildings. The company uses artificial intelligence to refine production and reduce labor costs, allowing you to streamline operations and maintain competitive advantages. This showed in the income statement, with margins growing even in the face of a decline in volumes. Automation also helps to accelerate production rates and reduce human errors, promoting efficiency and innovation of insulation products.
Similarly, Kone (KNEBV FH), the Finnish world leader in elevators and escalators, has used the decline in construction volumes in China to pivot towards modernization and connectivity. The company focused on predictive maintenance (using AI and machine learning) for a large fleet of approximately 10 million aging elevator systems. Service margins in this segment are significantly higher than those for new construction, positioning Kone for greater profitability as demand for modernization increases. These companies illustrate the broader trend towards modernization and automation which is leading to stronger and more resilient businesses emerging from difficult times. As volumes recover, we expect these companies to further benefit from operating leverage, increasing profitability.
Investors, what scenarios?
For investors, this means extending your investment horizon and using periods of market turbulence forninvest in fundamentally sound companies. Historically, some of the best investment opportunities have emerged during the periods of uncertaintyparticularly when central banks move from a tightening to an accommodating position. The dual support from the Fed and the Chinese authorities, along with continued progress in AI and automation,”they represent an opportunity to extend the investment window in order to capture all the potential of long-term opportunities”.
