The Flip Side

AI has been a major focal point for investors as tech companies compete for an edge in the race to deliver on its promises.The hyperscalers – tech giants like Microsoft, Amazon, Alphabet and Meta – have invested heavily in developing massive data centres, spending billions to stay ahead. But could DeepSeek, the Chinese startup, force a fundamental rethink of what’s required for AI to advance? In episode 69 of The Flip Side, Brad Rogoff, our Global Head of Research, and Ross Sandler, Head of Consumer Internet Equity Research, dive into the potential long-term effects of DeepSeek’s breakthrough. They explore whether hyperscalers still live up to the hype and how future AI innovations could alter the competitive landscape.

European equities are currently outperforming, but will this trend last? The discussion highlights the historical underperformance relative to U.S. markets and dives into macroeconomic and geopolitical factors shaping both regions. Challenges from U.S. tech dominance and trade policies are explored, along with the bullish potential for European stocks due to favorable valuations. The contrasting equity risk premiums and possible catalysts for growth offer intriguing insights for investors watching the evolving landscape.

Inflation has been a critical focus for investors in recent years. US headline PCE and CPI peaked at 7.2% and 9.1% in mid-2022, but with levels coming down toward the 2% Federal Reserve target rate, is it still worth the attention? Or can investors go back to more or less ignoring inflation, as they did pre-pandemic?In Episode 67 of The Flip Side, Brad Rogoff, Global Head of Research, and Mike Pond, Head of Global Inflation-Linked Research, dive into these pressing questions, examining the lingering risks of inflation being stuck at levels just high enough to influence Fed policy, as well as potential shifts in the labour market and tariffs, which could drive inflation risk.

US President-elect Donald Trump has indicated his incoming administration will make major policy changes on everything from tariffs to taxes, all the the potential to transform the global economy. Will Trump's policies lead to sweeping economic change or will the effects be incremental? In episode 66 of The Flip Side, Brad Rogoff, Head of Research and Global Chairman of Research, Ajay Rajadhyaksha, dive into these big questions.They examine the potential effects of implementing large-scale immigration reforms and deportations, which would have ripple effects on the labour market, particularly for industries reliant on undocumented workers. Brand and Ajay also explore the promise of deregulation, debating whether reducing regulatory hurdles for businesses can truly accelerate economic growth. Lastly, they tackle looming questions around tariffs and tax cuts, considering their potential to disrupt or stimulate trade and investment.

The podcast dives into China's latest economic stimulus measures, like interest rate cuts and mortgage tweaks, sparking debate on their real impact. While financial markets initially soared, concerns linger about the effectiveness of these policies against falling home prices and debt challenges. Discussions highlight a shift towards boosting consumer confidence with cash handouts, but skepticism remains regarding the actual benefits to global growth. Ultimately, the hosts examine whether these moves represent genuine recovery or mere temporary fixes.

Recent financial market volatility raises questions about a potential US recession. Analysts discuss the impact of rising unemployment and inflation on expectations. The shifting focus from high-valued AI stocks to smaller companies reflects changing market dynamics. Additionally, the unwinding of Japan’s carry trade contributes to global investment fluctuations. The conversation also highlights how these market changes affect consumer spending and the broader economic landscape.

Corporate bond and loan markets have traditionally been rigid when compared to equity markets, characterised by low liquidity, low trading volumes and higher transaction costs. In recent years, the explosion of credit ETFs and the growth of private credit markets has meant all that is changing, causing what our Research analysts call the ‘equitification’ of credit.In episode 63 of The Flip Side Global Head of Research Jeff Meli and Head of Thematic Fixed Income Research Zornitsa Todorova debate the upsides and downsides of this emerging trend and which investors stand to benefit.Read more on the Five Forces Reshaping Fixed Income Markets.

US carbon emissions are down c.20% from their peak over the past 20 years, thanks primarily to efficiency gains, such as increased miles per gallon for cars, switching to LED lights and moving towards high-efficiency boilers.Further emission reductions will require more changes from consumers on a number of fronts, such as switching from fossil fuels to electricity for cars, home heating, and so on.The US government is trying to influence behaviours through a range of subsidies and incentives. Is pushing on all fronts the best approach, or should efforts concentrate on one big issue that can have an outsized impact over the long term?In episode 62 of The Flip Side, Global Head of Research Jeff Meli debates that question with Will Thompson from our Sustainable and Thematic Investing Research team.

The podcast debates if the Fed deserves credit for declining inflation in the US without causing a recession. Factors like market expectations, post-pandemic economic realities, labor force shifts, and housing stock availability are considered as driving forces of cooling alongside the Fed's monetary policy.

The conversation dives into how AI and large language models like ChatGPT can revolutionize productivity across various sectors. Historical insights reveal that tech advancements, including smartphones, yield benefits over time. The transformational potential of AI is likened to electricity, promising rapid productivity gains but also raising job displacement concerns. The need for workforce reskilling and updated public policies, such as taxation and antitrust measures, emerges as crucial in navigating AI's economic impact.