The value of a disciplined, data-driven approach when markets pull back

The sell-off triggered by political risks to US data-centre development should be treated as a repricing opportunity rather than evidence that the long-term AI investment cycle has ended.

• US equities initially rallied after Donald Trump accepted the Republicans’ unexpectedly heavy defeat in the US midterms, but concerns about Democratic restrictions on data centres then drove a technology-led sell-off across global markets.
• New Democrat governors-elect, including Gina Hinojosa in Texas, have pledged tighter regulation of data-centre construction because of the facilities’ substantial energy and water consumption.
• Marlborough expects higher costs and longer development timelines, but believes new data centres will continue to be built because they support AI, productivity and economic growth.
• The S&P 500 outperformed the FTSE 100 in 98.6% of rolling three-year periods over the last 15 years, supporting the firm’s continued view that the US should remain its largest equity allocation.
• The portfolios have recently added to UK equities, reduced exposure to Japan and emerging markets, and increased government-bond allocations, including the active component through IFSL Arbion Sovereign Opportunities.

Takeaway: Investors should remain alert to political and valuation risks but avoid treating a sharp fall in semiconductor shares or one election result as proof that the structural technology trend is over; disciplined, diversified and dynamic portfolio management remains the recommended response.