00:00Seema Shah of Principal Asset Management then looking at the potential for a structural shift in markets writing quote
00:05Global investors have shown greater appetite to diversify away from US concentration risks
00:10Especially in AI leadership and renewed geopolitical unpredictability strengthens this incentive
00:16Recent dollar softness is consistent with this gradual global portfolio rebalancing
00:21Seema Shah is chief global strategist at Principal and she joins us now
00:25Seema is this your base case or after what we saw this week does it recede as a possibility?
00:32Hi Vani no I think this is the base case I mean we came into 2026
00:36We were not expecting the kind of policy volatility that we've seen in the first few weeks
00:40But certainly this momentum behind global diversification has really been underway since 2025
00:46But it's also really driven by fundamentals and I think they're a very good reason beyond just the geopolitical risk
00:52To be for investors to be thinking about global diversification
00:55I mean just to give you one example when we're thinking about the concentration risk in tech and we continue to like tech
01:01But we do agree that there is space in portfolios to think about alternatives
01:06And you know you don't only have to look at the S&P 493
01:10You can look at other international markets because actually the earnings growth outlook
01:14Is just about as strong as you get for the S&P 493 but generally with better earnings
01:19And of course you get a huge read on that in the next two weeks with earnings season really kicking into gear
01:26But just one more on the tariffs and the prospect for these threats coming out of nowhere and then maybe receding and sometimes not
01:34Stephen Englander today of South Jan out with a note saying tariffs are not the threat they used to be
01:39Is that true Seema? I mean are these threats that you know I'll put tariffs on if you don't do X by X date
01:45And then sort of not doing it. Does that mean that investors take these threats less seriously?
01:52Well I think what we've seen is that investors have been looking at last year
01:56You know we've seen the story before and the two key things that we
01:58What we understand from 2025
02:01Is that firstly the elasticity
02:03So the impact of tariffs on growth and inflation is considerably less than what people have been expecting
02:09Some of that reason is because of the strength of profit margins
02:12So corporates have been able to absorb those tariffs into their profit margins
02:17So that's one thing
02:17But also of course we have seen that tariffs have generally ended up at lower levels
02:21Than initially threatened
02:23And of course the economy has continued to perform very well
02:27We saw markets around the world not just in the US reach record highs
02:30So I think that has been something which investors are taking into account
02:33So when we do see some tariff news
02:36Investors remember that
02:38Really it's really earnings are the anchor for markets
02:42And that has to be the focus going forward
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