Wall Street is focused more on AI than war fears now: Standard Chartered strategist

Standard Chartered Bank’s Managing Director of G10 FX Research and North American Macro Strategy, Steven Englander, argues that US financial markets have shifted focus from geopolitical tensions to artificial intelligence and economic growth. Investors appear to assign a high probability to a ceasefire in West Asia, reflected in softer crude prices—West Texas crude at $87 per barrel and Brent in the low $90s—though no concrete deal has materialized. Englander states that while war risks remain, they are now a secondary concern, with AI and technology stocks driving equity optimism independently of geopolitical developments. Rising bond yields indicate economic resilience and strong investment trends, with markets showing less concern about the war. The US dollar has remained unexpectedly strong despite declines in oil prices, as investors prioritize bond yields and AI-linked capital investments. Normally, strong equities would weaken the dollar, but this time, the concentration of gains in US tech—particularly AI—has made the dollar more resilient. Englander highlights that AI-driven investments are being financed through bond markets and internal cash flows, with firms reporting consistent upside profit surprises over the past three to four years. Productivity growth remains robust, suggesting the AI investment cycle may be justified rather than speculative. The surge in borrowing demand aligns with firms’ expectations of strong returns, reinforcing market confidence in the sector. While the dollar’s strength is partly tied to bond yields, the shift away from oil price volatility signals a broader rebalancing of market priorities. Englander notes that the West Asia conflict is no longer the primary driver of trading decisions, even as investors acknowledge potential tail risks if optimism proves misplaced. The focus on AI and economic fundamentals has overshadowed geopolitical concerns for now.