Artificial Intelligence (AI) will continue to be a key driver of global markets over the next 12 months, although the beneficiaries of the technology may extend beyond companies directly involved in developing it, said Steve Englander, Global Head of G10 FX Research & North America Macro Strategy at Standard Chartered Bank.
Speaking to NDTV Profit, Englander said he expects markets to overcome some of the current uncertainties surrounding AI and that the technology will eventually benefit both its producers and users. However, he cautioned that investors should remain mindful of the multiple factors influencing markets, including geopolitical tensions, fiscal concerns and inflation.
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“We actually still think that AI is going to work, that the market will get over some of this uncertainty that we're seeing now. Maybe not quite to the bubble levels that we'd seen before,” Englander said.
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He highlighted the strong performance of non-technology stocks in the S&P 500, suggesting that companies using AI could emerge as significant beneficiaries through lower costs, improved productivity and higher earnings.
According to Englander, the benefits of AI may therefore extend beyond technology manufacturers, with companies adopting the technology potentially seeing meaningful improvements in their business performance.
Englander said a slowdown in the AI-driven market trade could weigh on the US dollar, potentially benefiting emerging-market currencies, including the Indian rupee.
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He added that lower US bond yields and a weaker dollar would generally support gold prices.
For India and other emerging economies where the direct benefits of the AI boom have been less visible, a shift in the dollar trade could provide currency support.
On the upcoming US midterm elections, Englander said markets would closely watch the extent of political control in Congress and the implications for fiscal policy.
He said a Republican sweep of both the House of Representatives and the Senate could be negative for bonds, as it would give the party greater room to push through fiscal legislation without necessarily addressing the widening budget deficit.
On the other hand, a Democratic victory, particularly if progressive candidates gain influence, could raise concerns about growth and anti-AI policy positions.
Englander said an outcome resulting in a divided Congress and limited legislative power for either party could provide greater clarity for markets by creating a political gridlock.
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