Investors should diversify equity exposure beyond AI trade, says Schroders' Adam Farstrup

Summary

Schroders' Adam Farstrup argues investors should stay long U.S. equities and technology but diversify equity exposure beyond the unusually concentrated AI trade. He points to value outside the U.S., European cyclicals and especially European banks as diversification tools, with European banks less tied to AI financing and supported by Europe's yield curve. He also sees U.S. stocks driving higher on rising earnings estimates and possible multiple expansion.

• Farstrup has been long equities for three years and still sees equities driving returns.
• He warns the AI trade is an unusually large single risk factor.
• He recommends diversifying into value outside the U.S., European cyclicals and European bank stocks.
• European bank stocks have outperformed the Mag-7 and are less exposed to AI financing.
• European banks are supported by Europe's yield curve and financing resurgence.
• U.S. earnings estimates are still being raised rather than cut.
• U.S. stocks can rise further via earnings beats or multiple expansion.