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Global investors are increasingly looking past the artificial intelligence (AI) boom to longer-term opportunities fueled by massive government spending aimed at tackling geopolitical, technological, and demographic challenges. Asset managers are diversifying across infrastructure, energy transition, healthcare, and defense, seeking to benefit from unprecedented fiscal stimulus on both sides of the Atlantic.
Mark Haefele, chief investment officer at UBS Global Wealth Management, said his firm, which manages $4.5 trillion in assets, is aligning with government priorities by investing in power, resources, healthcare, and defense. He noted that many investors underestimated how deeply fiscal stimulus could impact real and financial assets.
In the U.S., July’s sweeping tax-cut and spending package is set to extend Trump-era tax cuts, boost border security and defense funding, while trimming Medicare and Medicaid. This move will add trillions to national debt but also drive significant capital into government-backed projects. Meanwhile, Europe is seeing similar momentum, led by Germany’s €500 billion infrastructure fund and NATO’s commitment to raise defense spending to 3.5% of GDP.
Antonio Cavarero, head of investments at Generali Asset Management, emphasized that such stimulus programs create structural shifts lasting for years. He highlighted nuclear power, energy infrastructure, biotech, and defense as sectors the market cannot ignore, even though debt sustainability will eventually become a pressing issue.
While AI has powered much of the 14% rise in the S&P 500 this year, Europe’s STOXX 600 shows defense-related stocks surging nearly 68%, underscoring how fiscal priorities are reshaping market leadership.
Saira Malik, chief investment officer at Nuveen, which oversees $1.3 trillion, expects gains to broaden beyond U.S. tech to cyclical sectors, small-caps, and value plays. She advises balanced portfolios with U.S. exposure, while pointing to infrastructure, utilities, and waste management as inflation hedges.
Both UBS and Nuveen stressed that this is a market for active, not passive, management. As Haefele noted, “It’s less of a time for beta and more of a time for active investing.”
