Saira Malik

As the Middle East conflict fades and oil prices decline, inflation should moderate, and the market broadening trade resumes. Global equities, particularly European equities and cyclical sectors, will outperform growth stocks. The strong economy and continued buy-the-dip behavior support this rotation.

The S&P 500 can continue to climb higher from current levels, potentially reaching 7700 or higher, driven by strong earnings growth of over 20% for the full year. No multiple expansion is needed; earnings alone can push the index higher. Despite volatility from the Middle East, markets have tended to follow earnings growth.

UK political turmoil could cause higher fiscal spending and higher inflation, putting continuous pressure on UK equities and causing them to underperform compared to the rest of the world.

Malik observes a "shift from semiconductors to software" and notes that software is "quite under owned in portfolios across the board," specifically "about 100 to 150 basis points underweight." As the initial AI hardware hype (Semis) cools or meets incredibly high bars, investors are rotating into the application layer (Software). The underweight positioning suggests significant dry powder available to drive prices higher as this rotation accelerates. LONG Software to capture the rotation and mean reversion in portfolio allocations. AI spending slows down generally; software companies fail to monetize AI features quickly.

"The more tension that is created in the Middle East is causing oil prices to rise." She specifically highlights the "Strait of Hormuz, which accounts for 25% of oil exports." Geopolitical instability in critical transit chokepoints creates a risk premium for energy. If tensions escalate, supply constraints will drive crude prices significantly higher. LONG Oil/Energy as a hedge against geopolitical escalation. Ceasefire negotiations succeed; global demand weakens due to recession.

"The more tension that is created in the Middle East is causing oil prices to rise." She specifically highlights the "Strait of Hormuz, which accounts for 25% of oil exports." Geopolitical instability in critical transit chokepoints creates a risk premium for energy. If tensions escalate, supply constraints will drive crude prices significantly higher. LONG Oil/Energy as a hedge against geopolitical escalation. Ceasefire negotiations succeed; global demand weakens due to recession.

The market has adopted a "shoot first and ask questions later" mentality, selling off sectors like Financial Services and Healthcare on fears they will be "replaced by AI." Malik argues this is a mispricing. These sectors are actually the beneficiaries of AI because "AI really accelerates tons of data," and these companies own the proprietary data. They will use AI to increase productivity rather than being destroyed by it. LONG these sectors as a contrarian value play against the "AI displacement" narrative. Regulatory hurdles in using data; slower than expected AI integration.

The market has adopted a "shoot first and ask questions later" mentality, selling off sectors like Financial Services and Healthcare on fears they will be "replaced by AI." Malik argues this is a mispricing. These sectors are actually the beneficiaries of AI because "AI really accelerates tons of data," and these companies own the proprietary data. They will use AI to increase productivity rather than being destroyed by it. LONG these sectors as a contrarian value play against the "AI displacement" narrative. Regulatory hurdles in using data; slower than expected AI integration.