And interestingly, you've been – I wouldn't say full-out positive, but leaning toward some interest in Chinese names and Chinese economic stimulus that seems to be being promised more forcefully. Hi, Caroline. Thanks for having me.

So probably our strongest conviction is U.S. stocks, particularly because of U.S. exceptionalism. I think this thing is still going to trade into the new year, and the fact that U.S. companies are just so much more profitable.

So we still much prefer a U.S. dollar versus the rest of the world. However, for Chinese stocks, I think, you know, sentiment has been very depressed. I think investors are still doubtful about the scale of the stimulus and whether it is going to work.

So it is not that much of a consensus trade. I think this trade is still facing a lot of resistance. And we feel that sentiment has been way too negative. And valuations are very cheap.

There is a case to be made that there could be more stimulus coming, and the fact that economic data is stabilizing. So I think there's a case for investors to diversify into Chinese stocks as well. Small overweight in Asia, ex-Japan, on the back of that.

What, therefore, of the daily deluge we get on ramping up China-U.S. tensions? Yesterday it was about a video being investigated by Chinese regulators. There's an ongoing narrative around Micron as well. How have you been trying to price that?

in? Well, I have to say it is very difficult to price it. I do believe that institutional investors have somewhat been more prepared this time. And you can see that in some of the selloff in the trade-exposed stocks, for

example. European ex-UK stocks, for instance. So I think investors have already been making some adjustments, and thoughts on the trade tariff issue are very difficult to present. But I guess some of that is already reflected in markets, and obviously our

view is that the trade tariffs are likely going to be tit-for-tat, and negotiation tactics are doubtful. That the full extent of the threat is going to be fully implemented, although it is acknowledged that some of that will be

what we saw coming out of that. But it's not necessarily a deterrent to the ongoing rally in the U.S. equity market, for example. Okay. So the likes of Nvidia, which has an enormous valuation, continue to rally throughout 2024.

Does that continue into 2025? Can we vindicate these valuations? The run-up that we've seen in stocks like an 80% up on Oracle and 80% up on the listed depository notes of TSMC? Yeah.

You singled out Nvidia. They're not going to make a specific comment, but this is obviously a great start. Huge profit margins and still very strong guidance. Well, chip architecture, and I think I mean, this is a great company.

Obviously, investors have jumped on the high-value shares, I think, because the rally can still go on, given that, you know, investors still like strong, quality growth. So I would feel that investors will still be very much leading on this.

I mean, the semiconductor sector and tech in general, large cap in general in the US. I also feel that investors are more shifting and rotating into more software-related stocks instead of just semis/hardware. I think that makes sense because there is likely to be more, you know,

commercialization potential and realization as it moves forward from the infrastructure build-out to the inferencing and to the applications.

Tech Prepares For China's Tit-For-Tat Tariffs

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Bloomberg Technology

Investment Outlook: US Stocks and Chinese Stimulus

Positive outlook on US stocks due to US exceptionalism and profitability.

Strong conviction in US stocks, expecting continued growth into the new year.

Preference for US dollar over other currencies.

Cautious optimism regarding Chinese stocks due to depressed sentiment and uncertainty about stimulus effectiveness.

Belief that negative sentiment and cheap valuations present an opportunity in Chinese stocks.

Potential for further stimulus and economic stabilization in China, suggesting diversification into Chinese stocks.

Difficulty in pricing the impact of escalating US-China tensions.

Institutional investors appear better prepared for increased tensions, evidenced by selloffs in trade-exposed stocks.

Anticipation of tit-for-tat trade tariffs and doubts about successful negotiations.

Belief that some impact of trade tariffs is already reflected in markets.

Valuation of Tech Stocks: Nvidia and Others

Continued rally in US equity market despite rising tensions.

Questioning the sustainability of high valuations for stocks like Nvidia, Oracle, and TSMC.

Positive assessment of Nvidia's strong performance, profit margins, and guidance.

Investor preference for strong, quality growth stocks, potentially sustaining the rally.

Shift from semiconductor hardware to software stocks.

Expectation of greater commercialization potential in software due to infrastructure build-out and applications.