Mark Matthews, Managing Director and Head of Research Asia at Bank Julius Baer & Co., believes that the recent surge in crude oil prices, driven by geopolitical tensions, is unlikely to last. He noted that nearly 20% of global oil supply passes through the Strait of Hormuz, but the sharp rise in crude prices from $60 to $110 per barrel seems disproportionate to the supply disruption risks. Historical data suggests that politically related oil price shocks typically resolve within a few months, either through resolution or demand destruction.
Matthews also emphasized that the artificial intelligence (AI) investment cycle remains robust, supported by strong fundamentals rather than speculation. He cited S&P 500 earnings growth of 25-29% this year and a doubling of labor productivity in sectors like information technology, professional services, and finance since late 2022. Recent volatility in US equities, he argued, is largely due to retail and algorithmic trading rather than a structural shift away from AI-related investments.
Regarding India's technology sector, Matthews acknowledged challenges from AI automation in lower-end IT services but expressed confidence in the country's ability to adapt. He highlighted India's large talent pool and strong mathematical capabilities as key advantages for benefiting from the next phase of AI adoption. 'India will find a way to reinvent itself to benefit from AI,' he stated.