From the studio

Video: Investors Club | Swiss equities, European health care, and China tech (9 mins)

Thought of the day

Investor optimism wavered ahead of the US market open on Thursday after the two-week ceasefire agreement in the Middle East showed signs of fragility. Iran's parliamentary speaker said three clauses of the 10-point proposal have been violated following the Israeli attack on Lebanon, and that “a bilateral ceasefire or negotiations is unreasonable.” The Strait of Hormuz remains effectively closed despite reports of attempts by Chinese oil tankers to transit the narrow waterway.

Brent crude oil was up 3.2% at USD 97.8/bbl at the time of writing, partially reversing Wednesday’s 13.3% plunge. S&P 500 futures were pointing 0.3% lower, retracing a small part of the US equity benchmark’s 2.5% rally in the previous session.

With a US delegation, including Vice President JD Vance and special envoy Steve Witkoff, scheduled to head to Pakistan for a first round of talks with Iran later this week, whether and how the ceasefire will hold remains to be seen. We have advised investors to be mindful of the potential risk of re-escalation, and to diversify their portfolios with quality bonds, gold, and broad commodities.

But we also remain positioned for medium-term upside in equities. Recent developments show that our favored secular themes of AI, Power and resources, and Longevity should continue to underpin long-term stock performance.

The rapid rise of agentic AI points to durable demand. The adoption of agentic AI has continued to gain momentum, with encouraging monetization potential. For example, Anthropic’s annualized revenue has surged to over USD 30bn currently, from about USD 1bn at the end of 2024. The rapid increases in consumption of tokens (the basic unit of compute in AI models) as well as rental prices of GPU chips also point to accelerating enterprise adoption, reflecting the depth and durability of AI demand. While the current competitive landscape of frontier AI models means that some consolidation is likely over time, AI remains poised to become the operating system of the future, with agents increasingly able to execute tasks autonomously across existing and on-demand applications. We continue to recommend a diversified exposure to AI across its value chain and geographies.

Strong data center demand forms just part of Power and resources appeal. Microsoft was reportedly in exclusive talks with Chevron and investment fund Engine No. 1 on an energy complex in West Texas to power a large data center campus, while nVent recently projected USD 7tr of cumulative global capex for data centers between 2025 and 2030. Without taking any single-name view, these factors suggest data centers, as an end-demand market, should continue to contribute positively to the electrification value chain. Meanwhile, encouraging trends across grid resilience and transmission infrastructure, power generation and renewables, building electrification, industrial automation, and critical minerals should all present long-term opportunities.

Aging populations should drive sustained need for treatments across chronic conditions. The US Centers for Medicare & Medicaid Services (CMS) this week said it would raise the 2027 payments to qualified health insurers offering Medicare Advantage plans by a total of about 5%, an increase from the near-flat change it proposed in January. This has cleared the recent uncertainty over insurer profitability, providing a boost to the US health care sector. European biopharma companies, meanwhile, have recently flagged that pipeline development is progressing well across chronic diseases including oncology, cardio-metabolic diseases, and neurology, reinforcing investor confidence in both the near-term growth drivers and longer-term innovation. We continue to favor companies with exposure to large and growing markets such as obesity and caner, and those related to the structural trend of our Longevity theme.

So, while volatility is likely to remain in the near term, we continue to believe that exposure to structural trends will remain a key differentiator for equity market performance over the long run.