Markets continue to move through a noisy period, with artificial intelligence (AI), geopolitics and energy security all shaping investor sentiment.
This month Pie Funds Founder and Chief Investment Officer Mike Taylor and Matt Young, Portfolio Manager of the Pie Property and Infrastructure Fund, join Wealth Adviser Sam de Court to discuss what’s driving markets - and where they’re seeing opportunities.
In this month’s video, the team cover:
- Why the AI trade remains a major force in markets
- How today’s AI boom differs from the dot-com bubble
- Why markets have remained relatively calm despite conflict in the Middle East
- How energy security is shaping infrastructure opportunities
- Where the Pie Property and Infrastructure Fund is finding opportunities
Watch the video or read the full story below.
AI remains the dominant market theme
The AI trade remains in full swing.
Mike Taylor says comparisons are being made with the dot-com bubble, but there’s an important difference. During the dot-com era, many companies with little or no revenue were listing at very high valuations. Today, much of the strength in AI-related hardware companies is being supported by real revenue growth and strong earnings.
That doesn’t mean markets are calm. Some AI-linked and hardware-related names have seen very sharp share price moves, with a relatively narrow part of the market driving much of the recent excitement.
But the underlying driver is different from the late-1990s speculative boom: this time, earnings are playing a much more important role.
Markets remain calm despite geopolitical risk
Geopolitics remains another key theme.
At the time of recording, conflict in Iran and the wider Middle East was still ongoing. Despite this, markets had remained relatively calm.
Mike noted the oil price had fallen, suggesting investors were pricing in a more optimistic outcome, including the possibility of a resolution and a reopening of key shipping routes.
While geopolitical events can create short-term uncertainty, markets often look through the immediate noise and focus on the likely longer-term impact.
Energy security is back in focus
For infrastructure investors, energy security remains an important long-term theme.
Matt Young says the Pie Property and Infrastructure Fund has held up well through recent uncertainty, helped by exposure to energy infrastructure companies.
In Europe, the combination of previous disruption to Russian gas supply and current uncertainty in the Middle East has reinforced the importance of reliable energy access. That’s supporting companies involved in helping facilitate energy supply into Europe.
One example is Cheniere Energy, which owns and operates LNG facilities on the US Gulf Coast. Cheniere takes natural gas from the US, cools it into liquefied natural gas, and exports it by ship to markets including Europe and Asia, where it is used for industrial purposes and power generation.
The fund has also been adding to European utilities that may benefit as Europe continues to build out its own energy infrastructure.
Infrastructure can provide portfolio stability
Mike says infrastructure remains an asset class he is positive on because of its ability to provide stability within a portfolio.
Many infrastructure assets have relatively predictable long term cash flows. Airports are one example. While short-term events can affect sentiment and share prices, the long term value of these assets may be less affected by temporary disruption.
Mike noted that some airport companies had seen meaningful share price falls since the start of the conflict. Pie had previously been underweight airports, but now sees opportunities to increase exposure where prices have become more attractive.
Staying focused on the long term
Periods of uncertainty can be uncomfortable, but they can also create opportunities.
For Pie, the focus remains on looking through short-term noise, assessing the long-term value of businesses, and taking advantage of market movements where quality assets become more attractively priced.