Author: Fiona Craig

AI-Led Rally Has Increased Market Concentration

Goldman Sachs believes investors should begin preparing for greater portfolio diversification after years of strong equity performance pushed global allocations heavily toward U.S. stocks and the technology sector.

The investment bank said portfolios have become increasingly exposed to a narrow group of assets, raising the potential impact of any reversal in market leadership.

Technology Profitability Could Become a Risk

Christian Mueller-Glissmann said the post-2022 recovery has been dominated by U.S. equities and artificial intelligence, fundamentally reshaping the global “World Portfolio.”

He warned that “the current AI capex boom increases the risk that falling profitability for mega-cap Tech stocks materially drags on equity returns before benefits from AI adoption show up.”

Goldman also highlighted inflation volatility and fiscal uncertainty as additional challenges, saying they are “creating headwinds for balanced portfolios, with less of a buffer from bonds and more risk of rate shocks.”

Long-Term Returns May Moderate

According to the bank’s macroeconomic forecasts, long-term equity returns appear likely to remain below historical norms under most economic scenarios.

Only a highly favourable combination of resilient growth and an extended AI investment cycle would produce returns above long-term averages.

Momentum Still Favours Equities

Even so, Goldman cautioned investors against exiting the market too early.

The bank noted that equities “deliver some of their strongest returns in the final years of a bull market, often led by the sector that outperformed in the preceding years.”

Goldman’s Five Portfolio Ideas

To remain invested while improving resilience, Goldman recommends:

• Investing selectively in real assets.
• Diversifying across investment styles and factors.
• Increasing regional diversification.
• Using long-dated call options where appropriate.
• Adding alternative investments with low correlation to traditional portfolios.

The International Energy Agency has cautioned that China’s proposed export controls on rare earth minerals could have far-reaching consequences for global manufacturing, with as much as US$6.5 trillion in production outside China potentially exposed to supply chain disruption.

Although Beijing postponed full implementation of the restrictions by one year, the agency warned that the concentration of critical mineral production continues to present a major strategic risk.

Supply chains remain heavily concentrated

Rare earth elements play a vital role in modern manufacturing despite being used in relatively small quantities. They are essential components in electric vehicles, aerospace equipment, defence systems, electronics and renewable energy technologies.

The IEA’s latest Global Critical Minerals Outlook estimates that a full rollout of China’s export controls could affect around US$6.5 trillion of downstream manufacturing activity, with the United States and Europe facing nearly half of the potential economic impact.

“Our latest analysis shows that vast amounts of economic value depend on relatively small volumes of critical minerals, whose supply chains remain highly concentrated and are therefore vulnerable,” said IEA Executive Director Fatih Birol.

Graphite controls could add to supply pressures

The agency also highlighted proposed Chinese restrictions on graphite exports, another critical material used in electric vehicle batteries.

If implemented, the graphite measures could place an estimated US$300 billion of industrial production outside China at risk. China currently accounts for more than 90% of global processed graphite production.

Investment in alternative sources increases

Western governments have responded by expanding investment in domestic and allied critical mineral supply chains.

According to the IEA, public funding commitments for new mining and refining projects climbed to US$65 billion between 2023 and 2025.

The report also noted that new refining facilities in the United States and Malaysia have already reduced China’s share of global rare earth refining from 90% in 2023 to 85% last year. If planned investments move ahead, that share could decline to around 70% by 2035.

Annual inflation across the Eurozone declined to 2.8% in June from 3.2% in May, according to final figures released by Eurostat on Friday.

The reading confirmed the preliminary estimate published earlier this month and came in below economists’ expectations of 3.0%. On a monthly basis, consumer prices in the 21-country single currency bloc fell by 0.1%, matching the initial estimate.

Lower energy and food prices weigh on inflation

The latest data mean headline inflation averaged 3.0% during the second quarter, below the European Central Bank’s projection of 3.2%.

Economists at Capital Economics said the moderation was driven in part by lower fuel prices during June, which reduced energy inflation. They also noted that food inflation continued to soften.

Core inflation also eased to 2.4%, reversing the increase recorded in May that had been driven by higher prices for tourism-related services. The June reading returned to the level last seen in February.

According to Capital Economics, airlines may have absorbed much of the increase in jet fuel costs caused by oil supply disruptions linked to the conflict involving Iran, limiting the impact on consumer prices.

ECB continues to monitor inflation risks

While energy prices eased during June following a fragile ceasefire between the United States and Iran, the recent resumption of military exchanges has once again pushed crude oil prices higher, raising concerns that inflationary pressures could strengthen again.

The European Central Bank raised interest rates last month in an effort to contain inflation, warning that the conflict in the Middle East could generate additional upward pressure on prices.

Excluding energy and unprocessed food, harmonised consumer price inflation across the Eurozone stood at 2.1% year-on-year and increased 0.2% compared with the previous month.

Gold prices posted modest gains on Friday as investors stepped in to buy after the previous session’s heavy losses. Even with the recovery, bullion remained on course for its sharpest weekly drop since early June as geopolitical tensions and inflation concerns continued to favour the U.S. dollar.

At 03:12 ET (07:12 GMT), spot gold (XAU/USD) advanced 0.47% to $3,995.35 an ounce, while Gold Futures rose 0.18% to $3,999.22. Silver (XAG/USD) slipped 0.18% to $55.43 an ounce and platinum (XPT/USD) fell 2% to $1,589.57.

Inflation concerns continue to weigh on gold

Despite Friday’s rebound, gold remained about 3% lower for the week as investors continued shifting towards yield-generating assets and the U.S. dollar.

The latest decline followed renewed U.S. military strikes on Iranian targets after an attack on an oil tanker near Iran’s principal export terminal. The prolonged conflict has kept oil prices elevated, increasing concerns that higher energy costs could slow progress in bringing inflation under control.

Persistent inflation could encourage the Federal Reserve to keep interest rates elevated for longer, supporting Treasury yields while reducing the attractiveness of gold, which does not generate income.

Although recent U.S. inflation reports showed softer consumer and producer prices, investors remain cautious that rising oil prices could reverse the recent improvement.

Federal Reserve officials remain cautious

Federal Reserve policymakers continue to stress that inflation remains above target despite encouraging economic data.

Tony Sycamore, Senior Market Analyst at IG, said the weak reaction following softer U.S. CPI and PPI data was “not a particularly encouraging sign” for gold.

He added: “The overnight decline now brings a stern test to the view that gold has formed a base around the late-June low of $3,942.”

According to Sycamore, a fall below that support could expose the October 2025 low near $3,886, while a move above resistance around $4,140 would strengthen the technical outlook.

“For now, the metal starts the day in a delicate spot, feeling the weight of a stronger dollar and risk aversion flows,” he added.

Gold has remained close to the key $4,000-an-ounce level as Federal Reserve officials continue to signal that inflation is still too high to justify lowering interest rates. Markets remain focused on incoming economic data and energy prices for clues about the future direction of monetary policy.

Oil prices posted modest gains on Friday, with both Brent and West Texas Intermediate on course for their strongest weekly advance in months as geopolitical tensions between the United States and Iran continued to support the market.

At 04:10 ET (08:10 GMT), Brent crude futures were up 0.2% at $84.38 a barrel, while U.S. West Texas Intermediate (WTI) crude added 0.6% to $78.71 a barrel.

Although price movements were relatively limited during Friday’s session, both benchmarks remained on track to gain more than 10% for the week after the latest military escalation injected a significant geopolitical premium into crude markets.

Tamas Varga, an analyst at PVM Oil Associates, said “there is a lack of urgency in oil circles at present.”

He added: “There have been some quite significant developments without which the experience of the last few months would have crude prices harrying triple digits.”

Iran’s armed forces announced new strikes against U.S. military facilities across the Middle East early Friday, including what officials described as the country’s first direct attack on Syria.

The latest retaliation followed a sixth straight night of U.S. military operations targeting Iranian military infrastructure.

Concerns remain centred on the Strait of Hormuz, the strategic shipping route that carries roughly 20% of global oil supplies. Shipping traffic has slowed again following the renewed U.S. naval blockade of Iranian ports.

Market participants continue to assess whether supply interruptions could become prolonged or whether increased production elsewhere would help offset any disruptions.

Diplomatic initiatives remain active, with reports indicating that Qatar, Egypt and Pakistan are still attempting to revive negotiations despite the apparent collapse of June’s ceasefire agreement.

Meanwhile, recent U.S. inventory figures continued to support prices.

The Energy Information Administration (EIA) reported a decline of 1.7 million barrels in crude inventories during the week ended July 10, bringing total stockpiles to 409.7 million barrels. Gasoline inventories also fell by 1.5 million barrels.

Earlier data from the American Petroleum Institute (API) showed a draw of around 564,000 barrels in crude inventories over the same period, below analysts’ forecasts.

Burberry Group PLC (LSE:BRBY) has published its trading update for the first quarter of the 2027 financial year, providing investors with the latest overview of trading performance at the British luxury fashion group.

The update has been released through the London Stock Exchange’s regulatory disclosure service and is also available in the Results, Reports and Presentations section of Burberry’s corporate website.

To accompany the announcement, the company is hosting a virtual presentation for investors and analysts at 9:00 a.m. UK time. The webcast is being streamed live through Burberry’s website, with presentation slides available during the event and an indexed replay scheduled to be published afterwards.

The presentation forms part of Burberry’s ongoing investor relations programme, providing shareholders and analysts with an opportunity to review the company’s latest financial and operational performance while maintaining transparency around its strategic progress.

Burberry’s broader outlook remains mixed. While recent profitability has come under pressure and leverage has increased, the business continues to benefit from resilient cash generation, and management has expressed greater confidence in performance during FY27. Technical indicators remain weak, with the shares trading below key moving averages, while the company’s valuation continues to appear demanding based on its elevated price-to-earnings ratio.

More about Burberry

Burberry Group PLC is a British luxury fashion house headquartered in London and is internationally recognised for its premium clothing, accessories and signature Burberry Check pattern. The company is listed on the London Stock Exchange as a constituent of the FTSE 100 and also has American depositary receipts (ADRs) trading in the United States.

Its portfolio includes globally recognised trademarks such as the Burberry Check, the Equestrian Knight Device and the Thomas Burberry Monogram. Serving customers worldwide through a combination of retail stores, digital platforms and wholesale partnerships, Burberry remains one of the UK’s best-known luxury brands.