How higher rates and AI are reshaping markets

Valentin Bissat outlines a macro environment defined by structurally higher interest rates, a steepening yield curve, and persistent uncertainty around inflation dynamics. While short-term rates are driven largely by inflation expectations, long-term yields are increasingly influenced by fiscal risks and rising term premia, particularly in the US.

Against this backdrop, he highlights a cautious stance on duration, with an underweight position in developed market government bonds and a clear preference for shorter maturities across portfolios. The objective is to mitigate sensitivity to further rate increases, which continue to weigh on bond valuations.

On equities, the positioning remains selective. The AI investment cycle continues to provide strong support for technology and semiconductor sectors, driven by robust earnings momentum and structural demand linked to data infrastructure. However, broader equity markets appear more fragile, leading to a modest overall underweight and the use of hedging strategies, including put options covering a significant portion of exposure.

Gold remains a key long-term conviction, supported by sustained central bank demand and structural shifts in reserve allocation, despite short-term headwinds from rising real rates and a stronger US dollar.

Finally, the interview underscores a disciplined approach to portfolio construction in a regime shaped by the tension between stagflation risks and reflationary forces, where diversification and risk management remain central pillars of investment strategy.

The complete interview is available on Finanz und Wirtschaft and accessible to subscribers only.

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