The AI Boom Hits the Bond Market

• JPMorgan has created an 'AI factor basket' to help investors stress-test portfolios and identify safe havens during 'AI tantrums,' such as European equities, Treasuries, gold, and core real estate.
• The AI buildout is a massive super cycle, but corrections and fatigue are inevitable, making diversification away from concentrated AI-related assets crucial.
• Global bond yields are at multi-decade highs, driven by increased government and corporate debt issuance (including tech companies for AI infrastructure) and central bank forward guidance, shifting focus to the long end of the curve.
• Elevated geopolitical uncertainty, particularly in the Middle East, is seen as a 'new normal,' driving defense and infrastructure spending, and necessitating reorganization of energy supply chains.

JP Morgan's Gabriela Santos discusses the pervasive influence of AI on global markets, emphasizing the need for diversification despite the AI super cycle. She highlights the risks of market concentration, rising global bond yields driven by increased debt issuance and central bank policy shifts, and persistent geopolitical uncertainty, advocating for strategic portfolio construction.