Jeremy Richardson from the RBC Global Equity team sees volatility within the market as AI moves from theoretical to real-world applications.
Highlights:
Global equity markets appear stable but face underlying disruption from Trump's competition and cost-of-living policies.
AI continues to move from theoretical to real-world applications.
Uncertainty about which industries AI will disrupt drives investors toward businesses they consider "AI-resistant".
Company leaders present caution on 2026-2027 prospects, disappointing growth-focused investors.
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Hello, this is Jeremy Richardson from the RBC Global Equity team here with another update.
Although global equity markets have developed reasonably satisfactorily so far this year, at least if you look at the overall headline index level, beneath the surface there's been an awful lot of turmoil and disruption. That really kicked off with a number of executive announcements from President Trump trying to shape the way in which industries compete, trying to ease cost of living pressures on predominantly blue collar working households, leaving investors to try and anticipate what may be next on his list of things to do.
But more recently, it's been about artificial intelligence, which has been capturing most people's attention. So I think over the course of 2024, many people might have regarded AI as being a solution in search of a problem. We can't say that so much in 2026. AI tools have become much more widespread and companies are actually coming up with ever more convincing use cases for them. A lot of which are relating to coding opportunities. It seems you can code these days in natural language. You don't need to have learned any of these computer programmes.
It's lowering the barriers to entry for software companies in particular, and many of those software companies have seen their market capitalisations get a real thumping as investors begin to worry about what the terminal value, what the long-term value of these companies could be. It reminds me a little bit of playing tag in the school playground. Companies and investors are worried about who next may be “it” and are therefore very cautious about straying away from home. And you're seeing that playing out within the market with so-called AI-sensitive industries having their valuations being questioned and instead investors cleaving to the relative security of businesses and business models that they consider to be somewhat AI immune.
Throw on top of that a natural degree of a cautiousness from company management teams as they communicate with the market as they report their Q4 results. It's easy to see how we can see increasing levels of volatility. The thing that's weighing on company management teams' minds is that they too are seeing a lot of this disruption with respect to technological change. That obviously clouds their vision of what 2026 and the years beyond might look like.
So as they're communicating with the market, they're reporting generally pretty good numbers, but investors are really listening for what their thoughts might be about 2026 and 2027. And here, that natural conservatism of company management teams particularly in the face of technological change is leading to quite a cautious message, which is not going down terribly well with investors who are hoping to get a little bit more reassurance.
Hopefully, that should change as we begin to move through the rest of the calendar year. Quite understandable for management teams to try and lower the bar earlier in the calendar year, but as we go further through the year, they will have more evidence, more trading will have occurred, numbers will begin to firm up. And hopefully, that should present a much more robust messaging from company management teams and make it more obvious, I think, for investors too, about which companies are well positioned to benefit from the opportunities that technological disruption will deliver.
I hope that's been of interest and I look forward to catching up with you again soon.
