Markets Fueled by Enthusiasm for Artificial Intelligence

“Global equity markets have continued to rise in recent weeks, supported by solid corporate earnings and heightened investor enthusiasm for artificial intelligence. Market leadership remains concentrated in a handful of stocks, with technology firms, semiconductor companies, and AI‑infrastructure providers accounting for the bulk of the gains. Performance dispersion among stocks stays elevated as investors assess, over the long term, who will emerge as winners and losers in the AI‑driven transformation across different sectors,” says Filippo Garbarino, manager of the Lemanik Global Equity Opportunities fund.

Macroeconomic Outlook
The U.S. economy has shown relative resilience, underpinned by robust consumer demand, stable labor‑market conditions, and solid corporate results. Nonetheless, rising energy prices—linked to the conflict in Iran—have heightened inflationary risks, limiting the Federal Reserve’s flexibility and making the path of further monetary easing increasingly uncertain. Consequently, markets are expected to remain highly sensitive to new inflation and employment data.

Geopolitical Risks
While a de‑escalation of tensions in the Middle East has supported risk appetite, the conflict has underscored the vulnerability of global energy markets and maritime routes, especially those passing through the Strait of Hormuz. For equity markets, the primary risk is a renewed surge in oil prices, which could compress corporate margins, dent consumer confidence, and diminish expectations of monetary easing, potentially triggering heightened market volatility.

Market Outlook
We continue to view the current environment as broadly supportive for equities. Strong corporate earnings together with ongoing share‑repurchase programmes should provide a solid foundation for market performance in the coming months, even as we anticipate returns to be driven increasingly by company fundamentals rather than multiple expansions.

Portfolio Activity
During the month, the fund closed its position in Brown & Brown and increased its holding in AJ Gallagher.

Portfolio Positioning

• The fund’s portfolio is priced in line with the market on a Free Cash Flow Yield basis, yet the underlying companies are fundamentally stronger on a bottom‑up basis.

• Portfolio companies are growing revenue and EBITDA faster than the broader market and exhibit superior profitability metrics (margins, ROIC, ROE).

• They also carry lower leverage and generate higher‑quality earnings compared with market averages. This greater financial robustness should enable the portfolio to outperform the benchmark across a variety of market scenarios.

Sector Allocation

• The portfolio excludes banks, technology hardware, non‑discretionary consumer goods, pharmaceuticals, real estate, energy, and utilities.

• It is overweight in the financial, industrial, chemicals, and discretionary consumer sectors.

• The technology sector is underweighted, while the health‑care sector is neutral.