New kid in town 

1. DeepSeek disruption? Is the launch of this low-cost Chinese AI large language model the “Ryanair” disruptor to US mega-cap tech oligopolies? Only time will tell, but it could be the catalyst for rotation of sector leadership away from Technology. Favour equal-weight S&P 500, income/value stock and sector exposure.

2. Jevons Paradox – We think that the launch of DeepSeek will boost AI adoption and thus, is not posing a threat to the overall CAPEX development. Thus, the sell-off in AI related infrastructure looks overdone. As AI is becoming cheaper, we think that the benefits from using it can be harvested much faster. Investors should look for AI adopters as the next leg in the AI trade.

3. Trade Wars? We stick to our view that Trump is using tariffs as a negotiation tactic. As he pointed out in a 1987 book, he wants to “deal from strength”.  At the core, he is business-friendly and pro growth. Thus, the overall backdrop for US equities remains constructive. Favour SMIDs > equal weight > capital weight.

4. Europe: We´re not convinced by the sustainability of the recent EU outperformance vs the US. Nevertheless, we advise clients to not completely ignore EU equities as the region offers international growth compounders such as the GRANOLAS, with a decent discount vs global peers.

5. This month, we upgrade European Consumer Products & Services from Negative to Neutral, due to the strong consumption in the West. Solid Q4-2024 earnings season, particularly at the large US banks.