HOLT Global Overview: Strong corporate resilience, but rising market risks

Despite a highly uncertain geopolitical and inflationary backdrop, the economic cycle and corporate economic returns have remained strong, underpinned in part by the significant stimulus from AI capex spend. Consensus forecasts point to CFROI improvement across all regions and sectors, taking valuations back down towards the low end of their five-year range. A higher-rate environment increasingly calls for greater stock selectivity. With real bond yields back around pre-Global Financial Crisis levels, elevated equity valuations and businesses dependent on external financing potentially face greater scrutiny. Without the tailwinds of loose monetary conditions, Tech stocks and the growth-heavy US market are particularly exposed, compounded by rising question marks over the long-term profitability potential of AI-exposed stocks;