Investors Shift Focus from AI Hype to Long-Term Government Spending Opportunities

Economic

Summary:

While the AI-powered stock rally garners attention, global investors are focusing on long-term opportunities fueled by government fiscal spending on infrastructure, defense, energy transition, and healthcare. These sectors are expected to benefit from significant stimulus...

Despite the surge in artificial intelligence-driven stock gains, some of the world’s largest investors are pivoting their focus toward the broader economic landscape shaped by long-term government spending. As fiscal pressures mount due to geopolitical, technological, and demographic factors, investors are looking to capitalize on government-backed initiatives across sectors such as infrastructure, energy transition, healthcare, and defense.

Government Spending and Stimulus-Driven Opportunities

Asset managers are diversifying their investments to align with government priorities, which are being shaped by significant fiscal stimulus and policy shifts. Mark Haefele, chief investment officer at UBS Global Wealth Management, emphasized the underappreciated impact of fiscal policies on both real and financial assets. His firm, which manages $4.5 trillion in assets, is focusing on sectors like power, resources, healthcare, and defense, seeing these as key beneficiaries of government spending.

The U.S. has significantly increased its fiscal commitments with tax cuts and a $1.9 trillion infrastructure bill that will add trillions to government debt, boosting sectors such as border security, defense, and healthcare. Similarly, Europe’s infrastructure investments, notably Germany’s 500 billion-euro fund, and NATO members' pledges to raise defense spending, are also expected to drive growth in key industries.

Impact on Financial Markets and Long-Term Structural Shifts

Antonio Cavarero, head of investments at Generali Asset Management, highlighted that fiscal stimulus plays a major role in financial market performance, driving long-term structural shifts. According to Cavarero, the scale and persistence of fiscal commitments from the U.S. and Europe are unprecedented in comparison to previous cycles. However, he noted that it would take time for these fiscal policies to translate into tangible economic results, impacting sectors such as nuclear power, energy infrastructure, biotech, and defense.

While the S&P 500 has surged nearly 14% this year, largely driven by AI-related momentum, Europe's STOXX 600 index has seen more modest growth of 9.5%. However, certain sectors are benefiting from fiscal stimulus, particularly defense and aerospace, which have posted a remarkable 68% increase. This shows that while AI is dominating the tech sector, fiscal priorities are lifting industrial and defense stocks.

Looking Beyond U.S. Tech: Global Opportunities

Saira Malik, chief investment officer at Nuveen, a U.S. asset manager managing $1.3 trillion in assets, predicts that the equity rally will extend beyond U.S. tech stocks into cyclical sectors, small-cap stocks, and value plays. She also points to opportunities in infrastructure, utilities, and waste management, which offer resilience and act as effective hedges against inflation. The weaker U.S. dollar has further supported this broader global outlook, providing growth prospects in non-U.S. markets.

Both UBS and Nuveen stress the importance of active management in today’s market, with Haefele noting that this is a time for active investing rather than passive strategies. The evolving fiscal landscape, coupled with opportunities across multiple sectors, demands a more hands-on approach to investment, focusing on sectors benefiting from government spending and structural shifts.

While AI continues to drive market excitement, global investors are focusing on the long-term opportunities presented by government fiscal spending in infrastructure, defense, and energy transition. The ongoing shifts in fiscal policy and the search for inflation-resistant investments suggest that sectors beyond AI, such as healthcare, utilities, and defense, are likely to see substantial growth. Active investment strategies are key to navigating this evolving landscape, with investors urged to stay balanced while targeting high-growth areas backed by government stimulus.

Source: Reuters

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Economic

Global financial messaging network SWIFT, alongside more than 30 leading banks, announced on Monday that they are collaborating to create a blockchain-based system designed to revolutionize cross-border payments. The initiative aims to make international transactions instantaneous, secure, and more cost-effective, addressing the inefficiencies that currently make cross-border payments slow and expensive.

Blockchain-Based Shared Digital Ledger

The new system will utilize a shared digital ledger powered by blockchain technology, providing a secure and transparent way for banks to process cross-border payments in real-time, 24/7. This development is seen as a critical step toward modernizing international banking transactions and addressing the growing demand for digital money infrastructure. The timeline for full implementation is still being defined, but the project will start by focusing on improving the speed and cost of cross-border payments, which can currently take days to process.

In addition to facilitating traditional bank transactions, SWIFT's initiative will also make its system interoperable with new digital currencies, including stablecoins, tokenized bank deposits, and central bank digital currencies (CBDCs). This effort is crucial as central banks, including those in China and the European Union, are developing their own digital currencies, while stablecoins continue to grow in popularity. SWIFT’s existing global network, already operational in over 200 countries and connecting more than 11,000 financial institutions, will be leveraged to enhance the new system's reach.

SWIFT's Strategic Evolution

Despite being labeled “antiquated” by crypto advocates like Eric Trump, SWIFT sees this blockchain upgrade as a way to evolve and maintain its position in the rapidly changing financial landscape. The shared digital ledger will not only allow for faster payments but also ensure compliance with existing regulations, offering the resilience and security that traditional banks require.

Stablecoins, which have moved from niche crypto assets to mainstream financial instruments, are expected to play a key role in future global trade. According to a recent Citi report, up to $4 trillion worth of stablecoins could be in circulation by 2030, with a projected $100 trillion in annual trade. This growing importance of digital currencies has prompted around 90% of the world's central banks to explore or develop their own digital currencies.

Key Financial Institutions Involved

The collaboration includes prominent global banks such as JPMorgan, HSBC, Deutsche Bank, MUFG, BNP Paribas, Santander, and OCBC, along with banks from the Middle East and Africa. These institutions will play a vital role in designing and building the blockchain-based payment system, ensuring its integration with existing financial infrastructure.

SWIFT's blockchain-based overhaul, in collaboration with major global banks, aims to transform cross-border payments by making them faster, cheaper, and more secure. As the world increasingly moves towards digital currencies, this initiative positions SWIFT to remain relevant in the evolving financial ecosystem, addressing the need for greater efficiency and interoperability in international payments.

Source: Reuters

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Commodity

Oil prices declined on Monday, reversing some of last week's gains, as market participants focused on potential supply increases from OPEC+ and the resumption of crude flows from Iraq. Brent crude fell back below $70 a barrel, while West Texas Intermediate hovered near $65, adding pressure to an already fragile market.

OPEC+ Plans Production Increase

OPEC+ is considering raising production by at least 137,000 barrels per day in November, a move that is fueling concerns about oversupply in the global oil market. Despite this incremental increase being smaller than in previous months, delegates have emphasized that some members of the alliance may not have the capacity to produce significantly more. The alliance, led by Saudi Arabia, is pursuing a strategy to regain market share rather than focusing on price management, which is contributing to market uncertainty.

The resumption of crude exports through a pipeline from Iraq’s northern region to Turkey also added to supply concerns. The pipeline had been halted for over two years, but flows restarted recently, contributing additional crude to the global market. Iraq's North Oil Co. confirmed that exports via the pipeline are ongoing, further weighing on oil prices.

Market Outlook and Geopolitical Factors

Despite the current drop, oil prices remain on track for a monthly and quarterly gain, underpinned by robust stockpiling activity in China and geopolitical tensions, including Ukraine’s strikes on Russian energy infrastructure. Analysts expect the OPEC+ production increase in November to be similar to the 137,000-barrel-a-day hike planned for October, with market participants also factoring in the potential risks from ongoing conflicts involving Russia and Iran.

The International Energy Agency (IEA) has warned of a record supply glut in 2026 as OPEC+ continues to revive production while rivals also increase output. Goldman Sachs has also projected a decline in Brent prices, predicting that the benchmark could fall to the mid-$50s per barrel next year, despite strong stockpiling efforts from China.

Oil prices are facing downward pressure due to concerns over increasing global supply from OPEC+ and the revival of Iraqi exports. While geopolitical tensions and strong demand for stockpiling in China have provided some support for prices, the overall outlook points to an oversupply scenario, which could weigh on prices in the coming months. Market participants will continue to monitor the developments from OPEC+ and geopolitical hotspots to gauge the future direction of oil prices.

Source: Reuters

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China's new K visa program, set to launch this week, is aimed at attracting foreign tech talent, particularly in science, technology, engineering, and mathematics (STEM) fields. This move comes as the U.S. raises its fees for H-1B work visas, a popular route for skilled foreign workers, prompting many to explore alternatives. The K visa is part of China's broader strategy to bolster its tech industry and geopolitical standing amidst growing tensions with the U.S.

Details of the K Visa Program

The K visa offers foreign STEM graduates an opportunity to live and work in China without requiring a job offer, a significant advantage over the U.S.'s H-1B visa, which mandates employer sponsorship. The visa targets young, highly skilled individuals, and with no lottery system or application fee, it presents a streamlined and flexible option. This contrasts with the U.S. system, where applicants face a highly competitive lottery with limited slots and the newly introduced $100,000 fee for H-1B workers.

The timing of China's K visa rollout coincides with the Trump administration's move to increase H-1B visa costs, a decision that has sparked concerns among potential applicants, particularly those from countries like India. India, which accounted for 71% of H-1B visa recipients last year, stands to benefit from China's new initiative, as it offers an appealing alternative for Indian STEM professionals seeking better visa options. Immigration expert Michael Feller noted that the U.S. decision could play into China's hands, with the K visa providing a more attractive route for tech talent.

Challenges and Uncertainties

Despite its appeal, the K visa faces several challenges. The Chinese government has not provided detailed information on eligibility criteria, financial incentives, or pathways to permanent residency. Language remains a significant barrier, as most Chinese tech companies operate primarily in Mandarin, potentially limiting opportunities for non-Chinese speakers. Moreover, political tensions between China and countries like India could impact the number of Indian applicants for the K visa.

Historically, China's talent recruitment efforts have focused on repatriating Chinese nationals abroad, with initiatives offering financial incentives such as home-purchase subsidies and signing bonuses. While the K visa could broaden this strategy to include foreign talent, analysts argue that China's long-term immigration policies are unlikely to drastically shift to allow a large influx of foreign workers. Still, attracting a select group of global tech talent could strengthen China’s position in cutting-edge technologies, making it more competitive in the global market.

China’s new K visa represents a strategic move to bolster its tech sector and attract skilled workers amidst growing competition with the U.S. While the visa program offers a compelling alternative to the rising costs of U.S. work visas, its success will depend on how effectively China can address language and political challenges. Nevertheless, the K visa could still enhance China's technological capabilities and position in the global tech race.

Source: Reuters

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Commodity

China has revised its annual growth target for the production of key non-ferrous metals, such as copper and aluminum, for 2025 and 2026. The new target of a 1.5% annual increase represents a significant cut from the previous target of 5%, signaling a policy shift towards efficiency, sustainability, and long-term industry upgrades.

Policy Shift and Industry Context

This change in focus comes as China seeks to balance supply security with environmental goals. Years of rapid capacity additions in metals like aluminum, copper, and battery materials led to oversupply and profit squeezes, prompting the government to rein in production growth. The policy shift reflects Beijing’s commitment to decarbonization efforts and addressing the challenges of overcapacity that have plagued key sectors.

Alongside reducing production targets, China is emphasizing the importance of recycling. The government aims to achieve annual secondary metal output exceeding 20 million tons by 2026, focusing on reusing waste batteries, solar panels, and other scrap materials. This strategy is designed to reduce the environmental impact of mining while ensuring a more sustainable and circular metals economy.

Focus on High-End Products and Global Competitiveness

China’s new roadmap also includes goals for breakthroughs in high-end metal products, such as ultra-high purity metals and advanced rare earth materials. These products are seen as critical for enhancing China’s global competitiveness, particularly as the country navigates complex trade measures imposed by foreign governments. The shift also aims to help domestic companies remain competitive in international markets while maintaining sustainable growth.

The announcement has had an immediate impact on the metal markets. Copper prices rose by 1.1%, trading at $10,268.50 per ton on the London Metal Exchange as of 2:10 p.m. Singapore time. Other metals, including aluminum and zinc, also saw modest price increases. Chinese metal producers, such as Jiangxi Copper Co. and Aluminum Corp of China, saw their share prices rise by as much as 4.9% in Hong Kong.

China's decision to cut its metals production growth target marks a major shift in its industrial strategy. By focusing on sustainability, efficiency, and recycling, the country aims to address overcapacity issues while positioning itself as a leader in high-end metal production. While the move may lead to tighter supply in the short term, it reflects a forward-looking approach that balances economic growth with environmental and market realities.

Source: Bloomberg

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European stocks are expected to open in the green on Monday as investors remain focused on global economic developments, particularly the potential U.S. government shutdown later this week. Key indices such as the FTSE 100, DAX, and CAC 40 are forecast to rise by 0.4%, 0.5%, and 0.5%, respectively, as market sentiment stays positive despite uncertainties surrounding U.S. fiscal policy.

Lufthansa Announces Job Cuts and Restructuring Plans

In corporate news, Lufthansa revealed its plans to cut 4,000 jobs, primarily in administrative roles based in Germany, by 2030. The airline group aims to achieve these reductions through digitalization and automation as part of its broader restructuring efforts. Despite the job cuts, Lufthansa projects its free cash flow to generate over 2.5 billion euros ($2.93 billion) annually and has set earnings targets of 8%-10% growth over the next two years. Additionally, the company plans to invest 600 million euros ($704 million) in a new cargo hub at Frankfurt Airport, signaling a commitment to enhancing its logistics capabilities.

Danish biotech company Genmab made headlines with its announcement to acquire Utrecht-based cancer drugmaker Merus in an $8 billion deal. This acquisition is seen as part of Genmab's strategy to expand its oncology portfolio and strengthen its position in the biotech sector.

Economic Data Releases

On the economic front, Spain's inflation data and the EU’s economic sentiment indicator will be released on Monday, providing further insights into the region's economic health. These data points will be closely watched by investors, particularly in light of ongoing concerns over global economic growth and inflation.

In the U.S., President Donald Trump is set to meet with top Democratic and Republican leaders in Congress to discuss a deal on government funding. If no agreement is reached, the government will likely shut down on Wednesday, which could have far-reaching implications for economic data releases, including the September jobs report.

Earlier in the day, Asian markets opened broadly higher, with notable gains in the Japanese market. Sony Financial Group saw a remarkable 36% surge in its stock price after it spun out from its parent company, Sony Group. This positive momentum from Asia could help support European markets in the early hours of trading.

As European stocks are poised to open higher, investors are closely monitoring global economic developments, particularly the risk of a U.S. government shutdown. Lufthansa’s restructuring plans, which include significant job cuts and investment in new infrastructure, will be key in shaping its future performance. Meanwhile, the market will also be looking to the release of key economic data from Spain and the EU to gauge the strength of the region’s economy moving forward.

Source: CNBC

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South Korea’s exports in September are anticipated to rise sharply, driven by robust technology demand, particularly from the semiconductor sector. A Reuters poll forecasts export growth of 7.2%, marking the fastest pace since August 2024. Despite this positive outlook, ongoing trade talks with the U.S. and tariff concerns continue to cloud the economic landscape.

Factors Driving Export Growth

The expected export growth is attributed to several factors, including a strong increase in semiconductor shipments. In the first 20 days of September, exports surged by 13.5%, with semiconductor shipments up by 27%. This is further bolstered by front-loaded shipments ahead of the Chuseok holiday, which typically distorts trade data in September and October due to varying working days. This year, there were 24 working days in September compared to 20 in the previous year, contributing to the higher export figures.

While semiconductor exports are performing well, other sectors such as automobiles and machinery face ongoing challenges due to U.S. tariffs. Exports to South Korea’s two largest trading partners, the U.S. and China, have been under pressure. Shipments to the U.S. and China rose by only 6.1% and 1.6%, respectively, reflecting the impact of trade tensions and tariffs.

Trade Balance and Imports

Imports in September are expected to have risen by 5.6%, marking the fastest growth in 13 months. This increase follows a 4.1% decline in August. The trade balance for September is projected to show a surplus of $7.81 billion, a slight increase from the previous month's surplus of $6.51 billion. Despite the challenges posed by tariffs, South Korea’s trade surplus continues to widen, reflecting strong overall export performance.

South Korea’s export outlook for September is positive, driven by the semiconductor sector and calendar effects, with growth expected to hit a 13-month high. However, ongoing trade talks with the U.S. and tariff-related issues in sectors like autos and machinery continue to pose risks. South Korea's trade figures, set to be reported on October 1, will offer further insights into the economy’s performance and the impact of external trade pressures.