At: www.estrategiasdeinversion.com
The markets face a new scenario marked by high rates, inflation, oil, geopolitics and the enormous volume of investment linked to artificial intelligence. Given this change of board, managers are expanding their focus beyond large technology companies and finding opportunities in bonds, Europe, raw materials, energy, industrials and small caps.
Money is once again asking questions that for years seemed banished from the market: how much it costs to finance itself, where the growth is and what assets can offer protection when inflation, rates and geopolitics walk hand in hand again. The 30-year US Treasury bond is perhaps one of the best photographs of this new scenario. This summer, its profitability reached 5.33%, the highest since 2007, compared to levels close to 1% in 2020, reflecting the higher cost demanded by the market to lend money to the United States for three decades. The rise in yields implies a fall in bond prices and responds to a combination of factors, including expectations about rates and inflation, a higher term premium and the volume of debt that the United States must place to finance its deficits and refinance maturities. While the Federal Reserve has greater ability to influence the short end of the curve, long-term returns depend more on investors’ expectations about the economy and debt over the coming decades. That 5.3% does not in itself imply a solvency problem for the US, but it shows that financing is no longer cheap and that increasing costs may become a problem as a growing portion of the debt has to be refinanced at higher rates.
This new price of money also forces us to rethink how portfolios are constructed. The combination of high rates, geopolitical risks and a strong concentration of investment in artificial intelligence is leading investors to seek more diversified and resilient positions for 2027 and 2028. Jaime Medem, investment director at Mirabaud Wealth Management, believes that fixed income once again offers opportunities, especially in three-year sovereign debt and high-quality Investment Grade credit, while maintaining a tactical position in short-duration High Yield. Artificial intelligence, meanwhile, continues to occupy a central place, although from a different perspective: the firm does not see a bubble and expects the infrastructure investment cycle to extend until 2030, supported by the growth of data centers, cybersecurity and the expansion of demand beyond the large hyperscalers.
But the opportunities offered by this new scenario are not limited to combining assets within a portfolio. They also involve identifying where capital is moving and what major trends can sustain demand over the coming years. That is precisely the philosophy of Baltia Global, which seeks to take advantage of large geopolitical and economic movements to locate sectors with strong tailwinds, structural demand or supply problems. According to Enrique Couto, advisor at Baltia Capital, the portfolio maintains a relevant exposure to energy, energy infrastructure, copper and artificial intelligence, areas especially benefited by the growth of emerging economies, electrification and the development of data centers. Among its main positions stands out FTAI Aviation, linked to the maintenance and repair of aeronautical engines and which also seeks to take advantage of the growing energy demand associated with data centers.
Energy is, precisely, one of the points where many of these trends converge. With oil above $100, high rates and demanding valuations in the United States, Ibercaja Gestión is expanding its focus beyond large technology stocks. Pedro Lacambra, head of Variable Income at Ibercaja Gestión, explains that the firm maintains an overweight position in the US and neutral in Europe, while betting on financial companies, insurance companies, selected technology and industrial companies linked to the second and third derivatives of capex in artificial intelligence. In Europe, the strategy combines these sectors with other more punished sectors, such as luxury and food manufacturers, which could offer long-term potential after the weakness of consumption in China and the impact of the rise in bonds on the so-called bond proxies. In energy, Ibercaja applies tactical management based on the evolution of oil and also finds opportunities in engineering linked to the construction and reconstruction of oil and gas infrastructure.
This emphasis on assets linked to the real economy connects with another trend that is gaining weight in portfolios: the search for assets capable of offering protection against a scenario of inflation and high rates. According to Jordi Castany, investment analyst at Norz Patrimonia, real assets are gaining prominence as a way to reduce dependence on traditional equities and fixed income. Artificial intelligence continues to be, in his opinion, an important driver of growth despite doubts about valuations, and corrections in the sector can open entry opportunities. But Castany also focuses on Europe, where he identifies multinationals such as Prysmian, ASML, Schneider and Vinci, in addition to sectors such as infrastructure, defense and banking.
And if electrification, data centers and artificial intelligence are behind much of the increase in energy demand, they are also behind increasing pressure on the raw materials necessary to sustain that transformation. Copper, lithium, nickel and rare earths have become essential pieces of this process, while the electric vehicle and the energy transition expand their needs. Tirso de Linos Álvarez, Sales Manager at Rothschild Asset Management, believes that this combination could be giving way to a new cycle for metals. The expected strong increase in capex in artificial intelligence and electrification needs should continue to support demand, while metals have begun to show a behavior that is less dependent on the manufacturing cycle. However, the mining sector maintains a reduced weight in large portfolios compared to the big technological names and many companies have not yet fully transferred the rise in raw material prices to their fundamentals.
Market photography, however, is not limited to commodities and real assets. The rise in inflation, energy and rates has complicated the investment scenario, although the resilience of the economy is preventing an openly defensive turn. In this context, Alejandro Vidal, head of Investment Advisory at Deutsche Bank Spain, explains that the entity has neutralized its exposure to equities and is gradually increasing the duration of fixed income, where it finds value in both short-term bonds and higher quality debt with returns close to 4%. The focus of attention is also changing on the stock market. For Deutsche Bank, artificial intelligence is entering a new phase in which the market moves from primarily valuing the development of models and infrastructure to focusing on the adoption of the technology by companies capable of improving their productivity and reducing costs. Given the uncertainty, the entity is committed to diversifying coverage between quality debt, longer duration bonds, currencies and gold, instead of concentrating them in a single safe haven asset. Furthermore, the relative weight of Europe compared to the United States and emerging markets has increased.
Europe thus appears again on the radar, not only as a geographical alternative, but as an area where managers are finding companies whose potential does not always coincide with the general perception of the region. The Horos Value Internacional fund maintains around 60% of its portfolio in Europe and finds value especially in companies punished by the market, such as Acerinox and Aperam, where it considers that the investment thesis has been fulfilled and that the market is beginning to recognize it. This is explained by Miguel Rodríguez, manager of Horos AM, who also highlights opportunities in companies such as Booking Holdings, penalized by fears of the impact of artificial intelligence, and Suzano, the world’s largest pulp producer. The manager bases its strategy on investing in companies with competitive advantages, little debt and solid management teams, acquired at valuations that allow for a margin of safety, and currently maintains liquidity of less than 10%.
Within this European map, the industrial sector occupies its own chapter. It has gone through a difficult summer despite the improvement in the macroeconomic cycle, penalized by the exhaustion of some companies linked to the deployment of artificial intelligence, the oil supply shock and the worst recent performance of European aerospace and defense companies. However, the deterioration in the stock market has not been transferred with the same intensity to the fundamentals. According to Wolf von Rotberg, equity strategist at J. Safra Sarasin Asset Management, the situation could improve in the coming months. Investment by large cloud service providers continues to grow and should continue to sustain demand for AI-linked infrastructure, while an eventual recovery in oil supplies would ease pressure on airlines. In Europe, furthermore, increased defense spending, especially in Germany, could offer support to the sector’s profits. Despite the worse stock market performance, the earnings momentum of industrial companies remains solid and valuations have fallen from the highs at the beginning of the year, a context in which JSS AM maintains a constructive view on the sector, especially if the macroeconomic environment continues to be favorable in the United States and Europe.
The same combination of technology, energy and investment in infrastructure also opens up a scenario that until recently seemed reserved for science fiction: the race to bring energy production to space. The space race is entering a new phase in which energy may become the next great technological battleground. Although the US maintains a clear advantage thanks to SpaceX and Starlink, China is accelerating its space program through large investments, reusable launchers and large-scale production. The goal goes beyond communications or observation: Beijing aims to generate electricity through huge solar panels in orbit to power artificial intelligence data centers, future lunar infrastructure or even transmit energy to Earth.
And while these big trends are redefining entire sectors, a part of the market is also beginning to look towards companies that have been left out of the spotlight during the years of concentration on big technology. Small caps could thus face a new stage after a decade of strong market concentration in large technology companies. Erik Esselink, founder, Managing Partner, CIO and manager of West Bay Partners, believes that current valuations, the recovery of fundamental investment and the advancement of artificial intelligence are once again expanding the market and creating opportunities in small companies, especially in Europe, the United Kingdom and Scandinavia. Its strategy focuses on companies with long-lasting businesses, a differentiated investment thesis and an asymmetric valuation, also seeking to limit risk through controlled position sizes.