AI and defense sectors strong, consumer firms face challenges from high interest rates and inflation.

From Morningstar.: 2024-05-12 20:38:00

AI has dominated equity markets with 80% of flows into thematic funds and delivering the best performance for the last 18 months. Core AI plays like Microsoft and Nvidia are still strong, with Microsoft seeing a 17% revenue increase and Nvidia showing growth in cloud computing platform Azure.

Defence firms reported strong results due to European exposure to the Ukraine war, with book-to-bill ratios above 1. This trend is expected to continue as European countries restock munitions and NATO members increase spending commitments. The rise in defence spending is seen as a medium-term tailwind for the industry.

Consumer firms face challenges from high interest rates and inflation, leading to decreased purchasing power among customers. Luxury brands like LVMH and Burberry are also experiencing declines in consumption. However, the situation is expected to improve with falling inflation and potential interest rate cuts by major central banks, allowing firms to focus on improving margins.



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