Smart Investor: How to Hedge the AI Trade, CoreWeave’s Tumble, and the Outlook For Inflation
We wrap up our coverage of the markets and the week.
In this week’s newsletter:
- Weekly Market Update: Stocks Flat as Energy Rises, Communication Services Fall
- Top Strategists Share 5 Ways Investors Can Hedge the AI Trade
- Asian Equities: Value Emerges Among Japanese Chip Equipment Makers
- CoreWeave Debt Tumbles Anew as Korean Neocloud IPO Tanks
- Morningstar DBRS: How an AI Investment Slowdown May Affect Tech Subsectors
- Stocks Climb Higher During Election Months. Should You Adjust Your Portfolio?
- 4 Reasons To Think US Inflation Will Come Back Down
- What’s Happening in the Markets this Week
The artificial intelligence trade shuddered again this week, with chipmakers selling off dramatically. The Morningstar Total US Market Index ended the week near where it started, with a loss of 0.28%.
With the equities market as concentrated as ever, a loss of confidence in AI can reverberate throughout sectors and even other asset classes, including bonds. I spoke with strategists from BlackRock, Citi Wealth, and ClearBridge about how investors can hedge their bets during what one portfolio manager called an “unnerving moment” for markets. They laid out options for diversification among quality stocks, dividend payers, alternatives, and more.
Overseas, Morningstar’s Lorraine Tan sees value in certain segments of the Japanese stock market, including semiconductors, as well as internet, media, and entertainment firms that sold off on AI fears earlier this year.
Investor jitters played out in real time for CoreWeave. The stock plummeted as the firm’s debt tumbled to distressed levels. PitchBook’s Mairin Burns explains why investors are losing confidence in CoreWeave and other neocloud firms.
On the credit side of the equation, Morningstar DBRS analysts assess the risks of the billions of dollars spent on the AI buildout. What happens to the tech ecosystem when that investment slows down?
Looking ahead to next week, inflation will be top of mind for investors when the Federal Reserve meets on Wednesday. A hotter-than-expected September report sent ripples through markets and reshaped expectations for monetary policy. Still, Morningstar chief US economist Preston Caldwell explains why he’s optimistic that price pressures will ease over the next few years.
As always, visit our Markets page for our latest coverage, along with our full weekly calendar of key upcoming data and events.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
United States