Prof. Dr. Jan Viebig, Chief Investment Officer ODDO BHF Asset Management.
For investors, the current market environment requires two apparently contradictory virtues: first, the ability to react quickly to changing conditions and, second, solid convictions to stay the course in the face of uncertainty. Major stock markets are an increasingly uncomfortable places to be, as President Trump’s policies rattle investors’ confidence. Signals of an economic slowdown in the US, already apparent in the final weeks of 2024, have recently grown stronger. The broad-based S&P 500 stock index has lost around 8.3% since the beginning of 2025 (as of the end of March).
 |
12-month returns to 31 March of each year (%).
While we have reduced the weighting of American stocks in our portfolios, we believe it would be a mistake to turn our back entirely on the US market. Price losses in the S&P 500 are heavily concentrated in the darlings of the past months, especially the tech stocks known as the “Magnificent Seven” (Apple, Meta, Microsoft, Nvidia, Amazon, Alphabet, and Tesla). Investors should not be unduly surprised or worried. Indeed, over the past year, the US market has been largely driven by the Magnificent Seven, and these same stocks – with the exception of Meta – have seen some of the biggest losses this year. More importantly, market sentiment has recently turned against tech stocks, as investors consider that the increasingly gloomy economic outlook no longer justifies their sky-high valuations.
We remain convinced that a few central themes will drive markets in the long term. Digitalisation and artificial intelligence will play a key role, as well as infrastructure modernisation, while demographic change in many regions of the world will benefit healthcare. However, within these broad themes, the focus has shifted. In artificial intelligence, groundbreaking innovations such as chatbots (ChatGPT, for example) initially drove development and fired up investors’ imaginations, whereas today AI applications are ascendant.
AI relies on the ability to collect and analyse vast amounts of data, which can be used to intelligently automate tasks. It requires fast, powerful computer chips, large data centres, and massive data storage capacity. Investors have long focused on this area, and rightly so. Today, however, their focus is increasingly on the integration of AI solutions into companies’ business models. For example, RELX, an academic publisher, has launched an application that can draft documents for lawyers. In this way, AI is driving long-term changes in operational structure and work practices for many industries. Credit reporting agencies like Experian, for example, are increasingly using AI to assess the creditworthiness of loan applicants. This benefits applicants by speeding up response times and enables lenders to process larger volumes of applications more quickly and cost-effectively.
Cybersecurity solutions represent a growing segment within this category. Some tech companies are developing cybersecurity applications for their own use, which they also market to other businesses. Others are expanding their business models to include cybersecurity, often growing through acquisitions of highly specialised companies. We believe that cybersecurity will be a long-term and reliable source of revenue, earning attractive profit margins for the companies that emerge as leaders by investing wisely.
In all industrialised nations in Europe and North America, the need for infrastructure modernisation is huge. To this end, the incoming German government will have access to funding on a previously unimaginable scale. In the US and many other countries, roads, railways, schools, kindergartens, hospitals, airports, and electrical grids urgently need updating. Even more so in emerging economies and war-torn regions of Ukraine. Modernisation, however, is not just about building and repairing physical infrastructure, it is also about making it more intelligent so that it can be managed efficiently while contributing to climate goals. That is why we carefully assess which companies are best placed to offer smart power grids or stand to benefit from the trend toward sustainable building methods, for example.
We see healthcare as another promising long-term trend linked to population aging. Nursing and medical care are still very labour-intensive. We need innovation to address the shortage of skilled workers while simultaneously improving the quality of care, by using AI to remotely monitor patients’ health, for example. The wealth of innovations coming to market in the years ahead, from pharmaceuticals to medical technology and medical robotics, will provide interesting opportunities for investors. Technology will enable better diagnosis and treatment of diseases, while also helping to keep healthcare costs under control.
President Trump has ratcheted uncertainty up a notch even as the world grapples with worsening conflicts and rising geopolitical risk. No one can reliably say which of Trump’s announcements are intended as threats, which measures will be implemented, or when he is bluffing. Indeed, generating uncertainty appears central to his approach. In such an environment, flexibility and vigilance are key. Nevertheless, investors must stay the course and, in stock markets especially, focus on trends that are likely to outlast this phase of heightened uncertainty.
