Global Economics & Strategy "The Compendium - The 10 (+1) toughest client..."

Research evidence excerpt

Global Economics & Strategy "The Compendium - The 10 (+1) toughest client..."

ck above 3.0%. Committee divisions are spilling into the open. The labor market does

not look all that strong but hasn't broken yet. Inflation risks beyond rising energy prices

are mounting. Can he deliver rate cuts?

4. What are the right hedges to protect portfolios?

Rising Middle East tensions are fueling stagflation fears, with higher energy prices lifting

inflation while weighing on growth and undermining traditional diversification.

Historically, such environments have been challenging for equities, while TIPS, curve

steepeners, and defensive equity positioning have offered more consistent protection.

With tail hedges costly and timing uncertain, assets combining negative beta and

positive carry stand out as attractive, pragmatic hedging solutions.

5. What’s more important to the global economy: AI or energy?

Viewed in isolation, the global energy disruption is unambiguously negative. However,

trade in tech is nearly 2x larger than trade in energy, and memory prices have increased

8x faster than oil since the middle of last year. We estimate that economies where AI

related gains outweigh higher energy costs account for more than 50% of global GDP.

Leaving aside the obvious (net energy exporters that are also AI beneficiaries), China,

Korea and Taiwan are examples of energy importers where the AI gains outweigh the

energy costs. That equation could change if energy prices moved meaningfully higher, if

equity markets corrected on growth fears, if energy were physically rationed, or if the

energy driven slump in activity affected the AI capex cycle itself.

6. Are we seeing signs of de-dollarisation?

The concept of de-dollarization has received still greater interest since Liberation Day in