In the latest edition of Observations, Arbion’s Chief Investment Officer, Marco Pabst, examines a market environment shaped by two dominant narratives: fears of widespread disruption from artificial intelligence and escalating tensions in the Middle East. Despite these developments triggering bouts of indiscriminate selling across sectors and a notable rotation away from mega-cap technology stocks, markets have shown a surprising degree of resilience.

Dispersion across regions and sectors has widened significantly this year, with emerging markets and materials outperforming while parts of the technology complex have come under pressure. At the same time, geopolitical tensions have begun to influence markets primarily through energy prices, particularly LNG, raising concerns about near-term inflation and the potential implications for interest rate expectations.

Nevertheless, the broader macro backdrop remains supportive. With solid GDP growth, moderate inflation, and continued earnings expansion, the fundamental pillars supporting markets remain largely intact. While volatility may persist in the near term, Arbion believes the environment is increasingly presenting opportunities to deploy capital rather than reasons to remain overly defensive.

Download and read the full observation here.