Where to Hide During Market Shocks

Summary

Gabriela Santos discusses how investors can diversify away from AI concentration risk after July's AI-driven correction. She identifies Treasuries, gold, core real estate, and European equities as the few assets with different return streams. Santos still views the AI buildout as the most important capital-markets theme but warns that AI tantrums will remain a feature.

• JPMorgan has built an AI factor basket to test portfolio exposure and find hiding spots during AI shocks.
• Santos notes July showed sharp drawdowns in momentum, global semis, and Korea despite AI's strong long-term story.
• She says Treasuries, gold, core real estate, and European equities offer different return streams away from AI.
• Emerging markets, Japan, and US equities are described as AI-correlated rather than diversifiers.
• AI buildout remains the most important capital-markets theme with huge capex and visible profits.
• Memory and power are called out as strong parts of the AI earnings supercycle.
• Santos expects AI corrections or fatigue to recur, making portfolio diversification wise.