Market outlook, December 2025 - The AI theme is heating up
November has been a turbulent month in the stock markets. A weak start was, however, replaced by a significant recovery, and the monthly development in the major markets ended mostly flat.
What happened in November?
The shutdown of the American government is finally over. There is still a backlog in the delivery of many macro indicators. We therefore place great emphasis on signals from the companies' earnings season.
Overall, companies are delivering good results and expectations for future earnings. Together with our belief in a few more American interest rate cuts, this should provide a good backdrop for risky assets. The uncertainty relates to valuation at the high end, and to the massive investment appetite related to the AI theme. We therefore maintain a near-neutral equity weight in the portfolios.
Faltering narrative around AI?
The market correction at the beginning of November had the strongest impact on companies in the technology sector. Nasdaq was down as much as about seven percent at its lowest. Whether this is merely normal fluctuations or signs that the markets are increasingly seeing structural weaknesses within the AI theme is difficult to say for sure.
Some conflicting signals regarding further interest rate cuts from the American central bank may explain the short-term market changes in November. Lower interest rates are of course positive; however, we are skeptical that one interest rate cut or the other is leading for the development of these companies.
It is clear that it is the AI theme that has driven the stock market over the past three years. It is also likely that the use of AI has the potential to yield significant productivity gains. In many fields, it could also contribute to changing entire business models and fundamentally alter the need for labor.
