Iran-US War Had A Dramatic Short-Term Impact On Asset Allocation: Bank Julius Baer | CNBC TV18

Added: 2026-05-19

[00:00:13]Welcome back. Let's get a perspective from one of the top wealth managers. Uh Uh Yves Bonzon is group chief investment officer at Bank Julius Baer. Yves, great to have you with us here on the program on CNBC-TV18. Thanks for your time.

[00:00:27]Good morning. Thanks for having me. Good morning.

[00:00:30]Uh so, you know, there is there is a bull market in the US, especially on the AI chip chip-related names. There is a bull market in North Asian markets like Taiwan in Korea.

[00:00:43]Uh and maybe in markets like Japan, etc., as well, right? So, it's all AI and chips and that that part which has been doing phenomenally well.

[00:00:54]Whereas elsewhere, it's the situation is not as as bright. And perhaps I can I can categorize India in that uh in that that second bucket, Yves. So, just sort of, you know, talk to us a little bit about what you are telling clients globally at Bank Julius Baer uh about where to allocate, really.

[00:01:16]Thank you. Well, look, first of all, I think it's important to understand the fundamental environment we are navigating.

[00:01:23]Uh we've had post-financial crisis more than 15 years of private sector deleveraging in United States and in Europe. So, we deal with private sector balance sheets that are extremely healthy and resilient. In other words, there is no structural imbalance uh endogenously in the system.

[00:01:46]Which means we live in a world where the risk are outside the system.

[00:01:50]Uh we've seen the tariffs.

[00:01:53]We've seen the start of the war in Iran earlier this year. And it's extremely difficult to hedge one's portfolio against these shocks.

[00:02:03]In the background, you have the AI capex cycle. And the single most important number is probably the AI capex guidance by the US hyperscaler building the infrastructure enabling AI.

[00:02:20]As long as the capex is resilient and the numbers are realized upwards, the market is likely to stay firm.

[00:02:29]One of the important piece of anecdotal evidence later this year will be how well or not the market absorbs the equityzation that results from a landmark IPO.

[00:02:43]You know that we have three major companies lining up for market introduction in the US. So, the equityzation, which has been a very very important feature of US capital markets in the last 15 years, is temporarily at a standstill potentially turning to equityzation with a significant amount of supply. And that will be a big litmus test for the market.

[00:03:10]Mhm.

[00:03:10]Uh if morning and thank you very much for joining in. You know, when we started when you started the year 2026 and you laid out the investment horizon for your clients, war was not in the horizon, a Middle East war. And that's gone on longer than anyone's imagination. So, how has this war changed your investment thesis and the advice that you you know, giving your clients? If you could share the before and then after.

[00:03:36]Well, look, first of all, of course, we did not expect that war to happen.

[00:03:40]And it had a pretty dramatic impact on the short term on asset allocation trends. Essentially, if your positioning in January and February was right, Uh, March onward as the war started.

[00:03:55]Uh, and and the phenomena was compounded by the return of the AI trade from April onward with the earning season.

[00:04:03]Um, your asset allocation positioning was actually uh uh very unfavorable across most of March and April. So, that's the environment in which we operate and that's what I mean by the risk are outside the system because the air war is an exogenous shock, not something that anyone can predict. And the only way we can navigate this is through proper portfolio construction bubbling the theme. So, typically India is not working as a trade right now. This is a small allocation of ours.

[00:04:37]But it's an anti-AI and an anti-oil price trade because the situation is very fluid in the Middle East and things could go into reverse pretty swiftly.

[00:04:49]And Eve, you're here in India where you you're going to meet all your large clients out in Mumbai. So, what's the advice? India's a very small part of your portfolio as you said it's anti-AI, it's anti-energy, anti-crude. Uh, so what's the call now that collectively at Julius Baer you all are taking on India?

[00:05:06]Well, the call is to stay diversified in a bubble manner. So, typically our US allocation in portfolio focused on what is truly exceptional to the US market.

[00:05:19]>> [snorts] >> And here again there is a bifurcation because you have the the AI spending beneficiary and the potential AI revenue beneficiary, cost efficiency beneficiaries which as you know have been tremendously derated in the market.

[00:05:37]We think it's too early to move back to those that have been hurt by the AI trade.

[00:05:45]For now the momentum is still with picks and shovel, those who build the AI infrastructure.

[00:05:52]Hi Yves, good to see you and this is Nigel on this side. You know, quick word with regard to the Cospi. That's been the big outperforming market. It's outperformed most indices by a mile. And the last few trading sessions it's showing some signs of nervousness and I'm looking at the flows there have been some outflows actually. And coincidentally at the same time, India suddenly be getting a trickle of the flows. Do you think if the Cospi, you know, goes through a a bit of a correction, it may not be such bad news for market like India that's been starved of any kind of FI flows?

[00:06:21]It sure would be and and that's why we think that barbell portfolio construction is important. Now, with regards to the the memory stock trade that has been particularly favorable for Korea, it's really a function of the fundamentals of that trade. And you have an industry here, memory chips, which has consolidated into an oligopoly structure.

[00:06:46]It's an industry that was characterized by a lot of cyclicality.

[00:06:51]And the fact that those chips are now in high demand for generative AI as part of the CPU architecture is a complete game changer.

[00:07:04]In the meantime, those companies producing those chips are certainly reluctant to add to capacity.

[00:07:11]Which means that the bottleneck, the imbalance between supply and demand for these chips is probably a long-lasting phenomena >> [clears throat] >> that as long as the AI trade keeps on going and and that resonate with my point on AI at the scale of capex number, as long as that trade is on, those those companies are fundamentally very well supported. Now, in the short term, the market gets ahead of itself, too much money is flowing into leverage ETFs that buy those semiconductor stocks and at any time you're due for at the faintest hesitation you're due for some profit taking but I don't think we have witnessed at this point already early evidence of a trend changing fundamentals.

[00:08:02]You're absolutely right. So so far so good and no one wants to be the first person out right and and let it ride and ride it as long as it goes on. Thanks very much Eve for joining us and we have more conversation here with you and your team on CNBC TV 18.

[00:08:20]It's a wrap on Bazaar. Thanks very much for staying with us. Markets are doing quite well.

[00:08:24]I mean advanced decline the IT index. I mean lots of stuff happening. So we'll pick it up on chart busters on the other side.