In the first half of 2024, more than half of the total returns in the US stock market came from six stocks - Meta, Google's parent company Alphabet, Microsoft, Nvidia, Amazon, and Apple, known as the "Mega-Tech" tech giants. Predictably, these six companies are closely related to the hot artificial intelligence (AI) theme. Since the launch of ChatGPT in November 2022, Nvidia's stock price has soared by over 600% as a leading manufacturer of AI support chips. This remarkable increase is not only due to market enthusiasm for AI but also driven by the company's strong revenue and profit growth. These factors have pushed the concentration of the US stock market to historic highs. Overall, the outlook for these companies and the entire tech industry remains optimistic. Although these tech giants do not have entirely consistent business models, they share a common feature: strong competitive advantages that allow them to dominate their respective industries and maintain excellent growth, profit, and return levels. Unless there is significant regulatory intervention to break these "franchises," these tech giants are likely to continue to be profitable enterprises and core assets in global investment portfolios. However, one increasingly apparent challenge facing these companies is the massive investments in AI technology. The three major providers of AI infrastructure - Microsoft, Google under Alphabet, and Amazon, known as the "super-majors", are investing substantial funds in the AI "arms race," and there seems to be no sign of the investment slowing down. Part of the reason is that these companies have strong balance sheets and robust cash flows, making them financially capable of undertaking these investments. However, there are still doubts in the market about whether these investments can effectively shareholder returns. Schroders Global points out that in the AI-led tech cycle, tech company valuations are high, and the sustainability of investments in AI-related areas is uncertain as they continue to research how to profit from AI. Given the potential of AI technology and the reluctance of any "super-major" (i.e., large US AI infrastructure providers) to fall behind their peers, the situation is expected to continue in the short term. Other areas of the tech sector remain subdued and are in a longer downtrend. Improvement may be seen by 2025, benefiting from improvements in product cycles in certain cases. Stock valuations are expensive, but high valuations may persist briefly Stock valuations are not cheap, especially in the US. The continuous bull market in stocks has led to an increasing consequence: stocks are becoming more and more expensive. In this context, the stock market could easily be affected by some form of negative catalyst, such as external shocks triggered by escalating geopolitical conflicts. However, realistically speaking, these high valuations may continue to receive some level of support in the short term. From a macroeconomic perspective, global inflation remains on a downward trajectory, providing room for central banks worldwide to initiate a relatively synchronized rate-cutting cycle. From a micro perspective, the resilience of the US economy and the gradual stabilization of other developed and developing countries provide potential space for sales and profit growth in 2025. According to Schroders Global investment strategy research division (as of November 2024), future two-year global major market earnings forecast growth is steady, averaging 8-12% per year. If stock market valuations do not further decline, even if the returns are not stellar, they are still relatively reasonable. For investors, if the current market information remains fairly optimistic, the likelihood of Donald Trump winning re-election as US president is likely to be an uncertain factor in the medium term. Trump's "America First" policy represents a trend towards "deglobalization", weakening alliances, and more uncertainty. Clearly, the market does not like uncertainty. Trump 2.0: Tariffs and Taxes The tariff risk brought by Trump, including widespread imposition of tariffs (on all goods imported into the US), could be offset by depreciation of emerging market currencies, but it could have a significant impact on US inflation, which would severely affect low-income families, who are Trump's main supporters. Therefore, the bank expects Trump to implement tariff measures in a more moderate manner than implied by campaign rhetoric. Corporate tax cuts: Trump is likely to maintain profits by reducing the corporate tax rate from the current 21% to 15%. This will undoubtedly have a positive impact on the stock market. Immigration policy: If he continues to implement plans to deport up to 10 million undocumented immigrants (of which 80% have been living in the US for over 10 years), the impact on GDP could be significant, especially in border states. The cost of achieving this goal is also high. Energy policy: His campaign slogan "DrillBabyDrill" summarizes the Trump team's views on energy. All of this is to lower consumer gasoline costs, so Trump will encourage the US oil industry to advance production plans and promote growth. This is detrimental to the global economy and decarbonization process, and on the surface, it is also unfavorable for the development of the renewable energy industry. It is worth mentioning that.In other regions of the world, it appears that plans to reduce carbon emissions and achieve net zero emissions are advancing, and American green energy companies may be involved in them, although their level of involvement may not be as much as expected.Under the leadership of Trump, the world will obviously become different. Some of his policy measures will bring about many unexpected and substantial consequences, and the market may become more volatile as a result. Emerging market stocks The outlook for emerging market (EM) stocks is affected by the uncertainty under the Trump administration. Their valuations (excluding the Indian and Taiwanese markets) are generally low, but the market is facing a period of uncertainty. Key drivers include tariff risks, a strong US dollar, higher US yield curve (higher US bond yields), China's policy implementation actions, India, and tech trends. Trump's victory brings a period of uncertainty to emerging markets It is expected that Trump's policies will exert upward pressure on US inflation, raise the US yield curve, and support the US dollar. This tightens the financial conditions of emerging markets and has a negative impact on stock market performance. However, the US dollar is currently experiencing significant changes, putting pressure on emerging market currencies, many of which appear very cheap. Meanwhile, US bond yields and expectations for Federal Reserve rates have also adjusted significantly, and real interest rates in emerging markets (adjusted for inflation) are also relatively high. China's policy announcements will continue to impact its economy and market China made significant progress in April 2024 under a more coordinated and firm policy support. However, monetary policy remains tight, and subsequent fiscal actions are smaller than expected by the market. It is expected that the trade cycle will slow down by 2025, and China is currently facing tariff risks under the Trump administration. However, the real estate market in the largest "first-tier" cities is showing signs of gradual stabilization. The bank believes that the Chinese economy and market currently have strong policy support. Policy announcements can drive the investment market, and the positioning of China is still relatively favorable. Opportunities to enter the Indian market may come in the next few months Valuations in the Indian stock market are relatively high compared to historical levels, with rising profit margins and earnings expectations, coupled with an increase in stock supply, gradually offsetting strong local funds. Recently, in a situation of tightened fiscal and monetary conditions, nominal growth (growth not adjusted for inflation) has slowed down, and stock market performance has been weak due to challenged earnings expectations. This may be an opportunity to enter the market. The good monsoon in 2024, which usually increases rural income, also brings some room for loose monetary policy. India is neutral geopolitically, with lower tariff risks compared to other emerging markets, and attractive structural growth opportunities.