AI Growth Spurs Hope for Industrials, Infrastructure, Emerging Markets

Despite ongoing economic uncertainty and volatile inflation, experts at HSBC Asset Management believe that AI-driven growth may benefit certain sectors, including industrials and infrastructure, as well as emerging markets. According to a recent report by the fund house, the US-Iran Memorandum of Understanding has eased geopolitical tensions, leading to lower oil prices. As of August 4, Brent crude was trading at around USD 84.75 per barrel, while crude oil was at USD 81.02 per barrel.

The report notes that supply constraints in non-oil commodities have also eased, which should reduce tail risks for global growth and inflation. Additionally, the sharp decline in oil prices may create room for modest Federal Reserve easing in 2027, according to HSBC Asset Management. The AI investment boom is expected to continue driving market earnings and performance, with tech-adjacent sectors like industrials and infrastructure emerging as potential leaders.

Strong corporate profits are enabling markets to shake off concerns about complex supply shocks and spiky inflation. However, the fund house cautions that investors should diversify their portfolios amid a positive stock-bond correlation. With higher yields in bond markets, 'diversified income' opportunities have improved in fixed income and defensive equity sectors.