Investors' only hope is AI - because inflation will stay sticky and the Fed won't cut rates until next year, Deutsche Bank CIO says
- Finding the next AI moment could be investors' best hope of generating positive returns, according to Deutsche Bank's CIO.
- "This is what the future of markets will be," Christian Nolting told Bloomberg.
Finding the next high-growth investing theme will likely be investors' only real hope for generating positive returns, according to Deutsche Bank's CIO.
Christian Nolting said late Tuesday that he's expecting artificial intelligence and other disruptive technologies to become even more dominant, with other stocks struggling due to sticky inflation and the Federal Reserve holding interest rates at a high level.
"Very importantly, I think this is what the future of markets will be," he told Bloomberg Radio. "Growth themes will be maybe overdone at one point in time, but you always will need to find them – because unfortunately, our macro outlook for growth in the next years is not the best one."
The rise of AI has been one of the biggest stories in markets in 2023, with stocks like Nvidia racking up triple-digit gains thanks to an explosion of interest in the investing theme.
The sector's outperformance "is not a surprise," Nolting said.
"[AI] was there before in cars and machines, but I think it really got tangible at the beginning of the year," he added. "Normally that happens then a lot of people look into that, work with that, and find out – whoa, this is something that can really improve productivity growth."
Stocks' breakneck rally – with the S&P 500 climbing 14% and the Nasdaq Composite soaring 31% year-to-date – has come despite lingering concerns about soaring prices and the impact of the Fed's rate hikes.
Nolting believes that equities are set for a much more muted second half of the year because of those factors.
Core inflation will "remain sticky and not go back to the always-mentioned 2% level very quickly because of higher wages," he told Bloomberg.
"The worst thing that could happen to the central bank is that they cut rates, in order to find out core inflation's sticky, and then they hike again," Notling added. "I think that's something we want to avoid."