Susannah Streeter, Chief Investment Strategist, Wealth Club: ‘’In a week wracked with volatility, the US administration has piled on fresh uncertainty by rejecting a key climate finding that has underpinned net-zero investment. The extent to which the world is in an age of disruption has been laid bare by President Trump’s latest actions, at a time when AI advances are also causing havoc in financial markets.
The US President has announced the repeal of a scientific finding that greenhouse gas emissions endanger human health, removing the legal basis for federal climate regulations. This effectively ends CO2 regulations for new vehicles, adding further confusion for automakers. They have invested huge sums in advancing EV manufacturing, but this abrupt gear shift now throws a cloud of uncertainty over future investment plans.
The FTSE 100 looks set for a cautious start to trading in a volatile environment. Investors are looking ahead to an inflation reading due in the US, as they also try to assess the longer-term impact of AI disruption. CPI data is expected to show that headline inflation ticked up slightly to 2.5% year-on-year. A stronger-than-expected jobs report has pushed expectations for a Fed rate cut back to the summer. However, with artificial intelligence set to create huge upheaval across industries, it could ultimately exert downward pressure on prices.
Concerns that AI will be a job killer, eliminating roles across multiple sectors, are spreading. In an era of super-high valuations, something had to give. Tech giants have been propelled skyward on expectations that AI investment would revolutionise industry and society, delivering dramatic efficiencies in the world of work. Now, reality is dawning about just how disruptive this transformation may be. Real estate companies are the latest to feel the pain, as investors reassess future demand for office space if AI tools replace large parts of the workforce.
Jitters are also emerging about whether the tech industry can live up to its promises, given intense demand for memory and data storage. Networking company Cisco saw its shares dive 12% after warning that the outlook had become more uncertain.
The sharp falls across multiple sectors saw investors pull cash out of safe havens to cover losses. Gold and silver suffered steep declines amid the volatility but are now recovering. There is an ongoing flight from the riskiest assets, with the crypto winter deepening once again. Bitcoin is now trading around $66,000, down 46% from its peak last summer. Given that past crashes have seen the cryptocurrency fall by as much as 75%, there are fears it may still have further to slide. It has hardly been praised for reliability or stability-qualities that are very much in demand right now.
Trust is going to be even more valuable in the new AI world. Relationships built up with brands over many years will be harder to disrupt. But it is becoming clear that to remain resilient, companies need to accelerate AI adoption, otherwise disruptors will have a much greater chance of wreaking havoc on traditional business models.’’
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