Global equity markets remain supported by strong corporate earnings despite elevated valuations, geopolitical uncertainty and concerns around AI-driven market concentration, according to Lukas Kamblevicius, Schroders QEP Global Core Fund portfolio manager.
Kamblevicius believes investors risk overlooking the breadth of opportunities emerging across global markets as AI-related investment expands well beyond the dominant mega-cap technology names.
Speaking about the outlook for global equities, Kamblevicius said markets continue to be underpinned by resilient earnings growth across regions and sectors.
“While valuation multiples are elevated in some parts of the market, the earnings story we’re seeing globally remains incredibly encouraging,” said Kamblevicius.
“As long as companies continue to deliver earnings growth, equity markets can still generate strong returns without valuations needing to expand further.”
Kamblevicius said investor attention remained heavily concentrated on a small group of AI-linked technology companies, despite AI now spreading much more broadly across the global economy.
“AI beneficiaries stretch across a much broader supply chain than many investors realise,” he said.
“It’s not just chip designers like Nvidia. There are opportunities across semiconductor manufacturing, electrification, utilities, cooling systems, data centre infrastructure and industrial manufacturers globally.
“The capital expenditure that is coming into the market starts to benefit companies further down the supply chain; the companies that do cooling systems for the data centres, the companies that do wiring for the data centres. Micron (NASDAQ: MU), for example, is (as of Friday 22 May) the fourteenth largest company in the world from being very unknown 12 months ago.
“In Japan and Europe, parts of the industrial sector continue to offer attractively priced businesses with strong profitability and compelling long-term growth stories,” he said.
Kamblevicius also warned investors against focusing too narrowly on perceived risks within large-cap technology stocks while overlooking valuation pressures elsewhere in the market.
“Sometimes investors become too focused on the areas most discussed in the media while missing risks developing elsewhere. There are pockets of the market outside technology that are trading at much more difficult-to-justify valuations.”
He said heightened stock-level volatility and geopolitical uncertainty are making portfolio diversification and disciplined risk management increasingly important for investors.
“Single stock volatility is significantly higher than overall market volatility, which means position sizing and diversification are becoming increasingly important in protecting investor capital,” he said.
Kamblevicius said despite ongoing geopolitical tensions and market volatility, the combination of resilient earnings growth and expanding investment opportunities across sectors continued to support the long-term outlook for global equities.
“Until the earnings story becomes challenged, we continue to see solid opportunities for investors in global equity markets,” he said.
