Oil presents the biggest two-way risk for financial markets, with a durable US-Iran agreement potentially benefiting Asian and European investments relative to US assets, according to Bloomberg Television.
A better outcome on oil could shift the balance toward markets outside the United States as investment in artificial intelligence becomes more selective. The comments aired in “Oil Is the Biggest Binary Risk: Market Analysis,” published Nov. 3.
The interviewee said the US midterm elections would dominate news coverage over the following 24 hours but questioned how much they would change markets’ medium-term direction.
Political explanations often follow investment moves, the interviewee said, with narratives adjusted to fit what markets have already done.
Artificial intelligence remains the biggest investment theme, but the opportunities are becoming more differentiated after several years of driving markets. “It's not free money for everyone,” the interviewee said.
The interviewee cited OpenAI as an example, saying the company had reduced its fundraising ambitions ahead of a possible stock market listing. The remarks put its planned listing valuation above $1 trillion and the potential timing in the coming months.
Oil therefore presents a larger unresolved question as the artificial intelligence trade becomes harder. The interviewee described continuing nervousness about oil despite the previous day's price decline.
A US-Iran agreement that investors believed would last could benefit Asia and Europe relative to the United States. The remarks made that outcome conditional and gave no timetable for an agreement.
The interviewee expected US markets to lag in the coming months after what the remarks described as eight months of US outperformance. Markets elsewhere could benefit as the artificial intelligence trade evolves.
Turning to portfolio decisions, the interviewee described the year as one of the hardest in memory for managers investing across economies and asset classes.
Equity managers who buy some shares while betting against others have also struggled. The interviewee said there was no general answer for how portfolio managers should respond.
There are still opportunities to trade differences in the prices of investments. Investors able to look beyond immediate changes in portfolio values are also finding more attractive medium-term prices across stocks and markets.
The interviewee linked that assessment to strong global growth and continued government spending, saying investors with longer horizons were finding opportunities during the month.
On artificial intelligence, the interviewee expected productivity gains to reach software users and some consumer companies. Businesses supplying the equipment and components needed for the technology could also benefit.
The remarks cited memory-chip shortages affecting Apple and a 40% decline in major Korean stocks as reasons to revisit some suppliers. They did not identify those Korean companies or specify the period of the decline.
