US value midyear outlook: Regime change takes root

The investment landscape is undergoing a profound transformation as longstanding macroeconomic pillars—such as the US-led geopolitical order, globalization, and ultra-low interest rates—begin to unwind. This shift towards a world characterized by scarcity demands strategic investments in capital, tools, and resources necessary for infrastructure development across sectors like defense and supply chain resilience. While technological innovations such as AI present opportunities for efficiency gains and cost offsets, they also contribute to a more volatile environment with clear winners and losers.

Active management is becoming increasingly important as passive strategies struggle amid rising real interest rates that expose vulnerabilities within so-called "zombie" firms. Moreover, the traditional 60/40 portfolio model may lose its diversification benefits in an era of persistent inflation and global economic dispersion. As governments race to localize supply chains amidst geopolitical tensions, investors should focus on value-oriented companies poised to benefit from infrastructure rebuilding.

In this evolving context where financial assets face valuation compression while real asset inflation looms large due to tight commodity supplies; pricing power emerges as critical for maintaining margins amidst rising input costs. Investors are encouraged to explore opportunities in areas like real assets—including gold and copper—and capitalize on growth enablers such as AI technologies that promise sustained development regardless of broader macroeconomic conditions.