🇮🇳 Down on India

What’s going on here?

Goldman Sachs just hit the brakes on India’s stocks, blaming a slowdown in growth and some disappointing corporate earnings.

What does this mean?

Goldman’s stance has gone from “overweight” – meaning it expected stocks to outperform other markets – to “neutral”. Mind you, the investment bank’s not predicting a crash, but it does think Indian stocks will take a breather and move sideways for a while. The economy's losing steam and company profits are under pressure – pointing to weaker activity all around. Goldman’s own growth forecasts for India next year are well short of what other investors are predicting, and the valuation issue isn’t helping matters. Indian stocks are looking pretty pricey, similar to past market peaks, making gains tougher to come by. Add geopolitical tensions, a slew of new regulations, and an influx of new stocks into the mix, and you've got quite a few hurdles in the way.

Why should I care?

For markets: Stock markets ain’t the economy.

India’s a good reminder that strong growth doesn’t always lead to strong stock returns. In fact, research has shown there’s often little connection between the two: investor sentiment, valuations, and other factors tend to matter more. Just look at China: it’s seen decades of rapid economic growth, but its stock market returns haven’t always kept pace. So if you're eyeing Indian stocks, make sure it's for more than just the growth story.

The bigger picture: Spread the love.

Goldman’s not just cautious on India – it’s also lowered its long-term expectations for US stocks. Its analysts are forecasting annual returns of just 3% for the S&P 500 over the next decade, a far cry from the 13% average of the last ten years. That’s a wake-up call to diversify – across regions, sectors, company sizes, and asset classes – to make sure your portfolio stays on solid ground. And, yes, you can still factor India into that mix, but make sure it’s part of a balanced approach.

What’s going on here?

BlackRock is jumping headfirst into the AI wave with two new actively managed exchange-traded funds (ETFs).

What does this mean?

AI is reshaping industries, and BlackRock wants in via the medium of active ETFs. Remember, they’re not much different from regular ETFs, which track an underlying asset or index, except they’re actively managed by fund managers trying to beat the market’s returns. First up is the iShares AI Innovation and Tech Active ETF (BAI) which targets AI powerhouses like Nvidia and Microsoft, as well as emerging players like Astera Labs, for an overall focus on AI infrastructure, models, and applications. Next is the iShares Technology Opportunities Active ETF (TEK), which casts its net wider by investing in up to 70 companies across semiconductors, software, hardware, and other tech areas that are set to be transformed by AI’s rapid growth.

Why should I care?

For markets: Tread carefully.

These investments offer easy access to AI with active management, but be cautious – new ETFs often launch when valuations are sky-high, which can lead to a rocky performance. A smarter strategy might be to add overlooked companies to your portfolio like data center power suppliers, cooling system specialists, or information services companies providing key data and analytics. These under-the-radar plays could benefit from AI’s growth, offering a more balanced way to score a win from its potential.

The bigger picture: To bubble or not to bubble.

One of the world’s biggest hedge funds, Bridgewater, is calling it: the AI bubble hasn’t peaked – it’s just getting started. It sees AI as game-changing technology, backed by good feeling, solid growth, and a supportive wider environment. Sure, AI investment has been concentrated so far among a few major players, but as it matures, the hedge fund says it expects industries across the board to jump in, leading to a wave of cash flow and a deep market impact.