Is it time to ask tougher questions?

Investors should remain positive on markets but become more selective as financing risks, political uncertainty and higher oil prices expose differences between assets, sectors and countries.

• Questions over debt-financed AI infrastructure pressured technology, semiconductor and AI infrastructure shares, while healthcare, consumer staples and financials attracted flows.
• Brent crude rose above USD 115 a barrel, increasing inflation concerns and complicating the outlook for central banks.
• France came under particular pressure: its 10-year yield moved above 5%, while the spread over equivalent German bonds widened to around 170 basis points, levels not seen in decades.
• Quintet continues to favour equities over bonds, but reduced European equity exposure earlier in the year and recently moved to a neutral stance on European government bonds.
• The firm also sought greater resilience through equity warrants in eligible portfolios and lower exposure to US corporate credit, while expecting Microsoft, Alphabet and Amazon results to test whether AI capital expenditure is generating sufficient revenue and earnings growth.

Takeaway: Maintain a constructive market view, favour equities selectively over bonds, and scrutinise the funding, expected returns and credibility behind corporate investment and government finances.