Selectivity Becomes a Key to Success

The Bull Market That Ignores the Textbook

The stock market environment remains positive, but not for the reasons one would hope for in an ideal world. It’s not falling interest rates that are driving the markets, but robust earnings growth—and this growth continues to be concentrated primarily in the U.S. and in those market segments that benefit directly or indirectly from the expansion of AI infrastructure. So the good news is: Fundamentally, the bull market isn’t on thin ice. The less romantic news: It isn’t driven by cheap money, but by the need to continue delivering profits.

BlackRock and Citi, in particular, are emphasizing this point very clearly. The market is currently grappling with the conflict of interest between higher interest rates and strong earnings growth. As long as earnings growth remains strong enough, it can offset the valuation pressure from higher interest rates. This is exactly what has been observed so far, particularly in the U.S. technology sector. There, earnings growth is so robust that even a more restrictive interest rate outlook has not been enough to undermine the fundamentals of stock price performance. In other words: Tech stocks are expensive, but so far at least for a challenging—rather than a completely absurd—reason.

UBS and Deutsche Bank also essentially reach the same conclusion, albeit with slightly different emphases. UBS highlights the persistently strong earnings growth in the U.S. and the structural support provided by the AI capital expenditure cycle. Deutsche Bank also remains constructive on equities but places greater emphasis on the side effects of the current environment: higher energy prices, geopolitical uncertainty, and an inflation picture that leaves central banks little room for a truly comfortable easing path. This is not a contradiction, but rather a sober division of labor: Some explain why the market is rising, while others remind us why it may still be unsettling.

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Regional Positioning

Regionally, the overweight position in the U.S. remains the most compelling call. The U.S. market continues to combine the strongest earnings momentum, the highest visibility in AI investments, and the broadest range of structural winners in the capital markets. Citi has raised its price target for the S&P 500 to 8,100 points, and other firms also remain positive due to earnings growth. That doesn’t mean valuations are harmless. But the market is currently willing to tolerate high valuations as long as earnings are rising fast enough. For many investors, this isn’t an ideal rationale, but as we all know, in the stock market, you don’t have to like what works.

Emerging marketsalso remain overweight>, particularly where valuations, economic momentum, and AI hardware exposure converge. Asian markets, in particular, benefit from the fact that they constitute essential parts of the global AI supply chain. At the same time, they often offer more attractive valuations compared to the U.S. This makes emerging markets an interesting complement to a portfolio’s U.S. bias: less expensive, but by no means out of step with the theme.

The outlook for Japan remains neutral. Fundamentally, the market looks solid, primarily due to technology, export quality, and banks. At the same time, Japan’s monetary policy environment is no longer quite as accommodative as in previous years. The tailwind from ultra-loose monetary policy is gradually subsiding, and that is precisely why Japan is more of a solid portfolio component than the most obvious performance driver. For Switzerland , a neutral to slightly positive assessment is also appropriate. Swiss stocks remain high-quality, defensively stable, and useful as a portfolio stabilizer in a volatile global environment. However, they currently represent more of an answer to the question of robustness than to the question of maximum performance. That’s not particularly exciting, but as we know, the majority of truly useful portfolio components are rarely exciting.

Europe ex-Switzerland remains underweight, as does the UK in relative terms. The reason for this is less a fundamentally negative view of European stocks than the weaker combination of earnings momentum, economic momentum, and structural growth. Europe is more attractively valued, and that is precisely why there are repeated attempts to automatically derive a stronger investment recommendation from this. Unfortunately, attractive valuations alone have never reliably ensured that companies grow faster. Europe thus remains a market for stock picking, not for heroic beta.

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Sectoral Positioning

At the sector level, technology—specifically AI infrastructure —remains the most important overweight. This primarily includes semiconductors, hardware, data center infrastructure, power and grid-related themes, as well as select large platform companies. The thesis is simple: The expansion of AI infrastructure is not short-term hype without capital requirements, but a real investment cycle with real winners. That is precisely why the sector remains fundamentally leading. At the same time, this is also the area where positioning is the most concentrated. In other words: being structurally correct does not protect against tactical pain. Investors in this sector should therefore aim to be right, but not expect a straight-line trajectory.

A second Overweight recommendation applies to quality financials, particularly select banks. Higher interest rates, robust balance sheets, and solid earnings structures continue to support parts of the financial sector. Unlike in previous cycles, the sector this time does not appear to be merely a lever for economic optimism, but in many cases a genuine beneficiary of a prolonged environment of elevated interest rates. This does not automatically make banks glamorous, but glamour has rarely been a reliable investment strategy anyway.

A third Overweight recommendation applies to healthcare equipment and other quality defensive stocks. Here, attractive valuations, solid fundamentals, and lower dependence on day-to-day macroeconomic drama argue for a higher weighting. Especially when compared to very expensive growth segments, such sectors offer a useful counterbalance in the portfolio. In a sense, they serve as a reminder that even on the stock market, not every good idea has to end with semiconductors.

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Underweights

On the underweight side, broad European cyclicals remain unattractive. Higher energy prices, tighter profit margins, and weaker economic momentum are putting these segments under greater pressure than their counterparts in the U.S. or in select emerging markets. Investors looking to bet on Europe should therefore take a selective rather than a broad-based approach. Energy-dependent consumer segments also remain underweighted. In an environment where real purchasing power, input costs, and financing conditions can all come under pressure simultaneously, the risk-reward imbalance there is not very appealing. There are more appealing areas in the market to buy cyclical risk.

Tactically, part of the overcrowded tech segments also warrants a relative underweight position, although the long-term structural case remains positive. This is not a fundamental contrarian call, but rather a matter of market technique. When everyone owns the same good thing at the same time, the fundamentals don’t go wrong—but the risk-reward ratio becomes significantly less favorable. The market has the unpleasant tendency to truly love good news only after it has long been priced in.

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Overweights and Underweights

U.S.: Overweight

Strongest earnings momentum, high visibility in the AI investment cycle, broad capital market leadership

Emerging Markets: Overweight 

Attractive valuation, favorable macro dynamics, strong AI hardware exposure

Switzerland: Neutral to slightly positive

Defensive quality anchor, stabilizing portfolio function

Japan: Neutral

Good fundamentals, but less monetary policy tailwind

Europe ex Switzerland: Underweight 

Weaker earnings and economic momentum, lower structural momentum

UK: Underweight

Relatively weak regional profile compared to the U.S. and EM

Technology / AI Infrastructure: Overweight

Structural beneficiary of the global AI capex cycle

Quality Financials: Overweight

Robust earnings; interest rate environment supports margins and profitability

Healthcare Equipment / Quality Defensives: Overweight

Attractive valuations, stable fundamentals

European Cyclicals: Underweight

Higher energy dependence, weaker margin dynamics

Energy-dependent consumer goods:&Underweight

More vulnerable to cost and demand pressures

Crowded tech segments (tactical): Underweight

Overbought and heavily positioned, despite a positive long-term outlook

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‍Rico Albericci, CEFA

_{Source: MarketMap, Chefinvest, UBS, WisdomTree, Citi Wealth, Deutsche Bank
As of: June 23, 2026}