• Inflation is cooling, but not declining fast enough. Core PCE inflation remains above the Fed's forecasted downward trend. The labor market is tight, with two jobs available for every unemployed person, allowing workers to demand higher wages. Services PMIs are improving, but manufacturing remains in contraction. The Fed skipped a hike in June to assess the effects of aggressive policy tightening, but two more rate hikes are expected starting in July.
• Updated guidance and hawkish stance from US Federal Reserve on interest rates trajectory in the coming quarters will continue to dominate sentiment in equity and fixed income markets.
• Market is expecting an economic slowdown as indicated by the inverted yield curve. The fluctuating job data and business sentiment, along with a manufacturing PMI that still exhibits signs of weakness, add to the prevailing uncertainty.
• Given this uncertain landscape, investors should exercise caution and be highly selective when it comes to sector exposure.

• The presence of a resilient consumer base with ample savings, along with the post-global financial crisis recovery cycle, has propelled us into a trajectory of asymmetrical/disparate growth as opposed to broad based participation. Meanwhile, disruptions in the global supply chain caused by the ongoing pandemic over the past two years have accelerated inflationary pressures. This, coupled with Geopolitical uncertainties, have further contributed to inflation, necessitating aggressive rate hikes.
• Economic growth can remain positive yet moderate during late cycles. In this context, investors may consider defensive stocks, particularly large-cap quality stocks, as they can provide downside protection.

• Considering the continuous innovation in the AI space, we anticipate a significant growth trajectory. We expect the global AI market to grow at a CAGR of 35.6% to nearly $300 billion in sales by 2026, 10 times its size in 2020^[2].

• Automation plays a key role in driving efficiency, growth and transforming production processes. It enables companies to achieve higher productivity levels through increased efficiency, cost reduction, and improved product quality.
• While labor (onshore and offshore) continues to be more expensive over time, robotics costs have declined. This dynamic alongside improving technology is driving the case for adopting automation.

• The adoption of EVs is the primary pathway for reducing greenhouse gas emissions throughout the transport sector. EVs are forecast to account for 36% of global vehicle sales in 2030 and 55% in 2035. As the world moves closer to a net-zero economy by mid-century, EVs could make up more than 75% of sales[3].
• The deliveries of electric vehicles have been increasing, with a greater emphasis on pure EVs as opposed to hybrids. The mix of vehicles has shifted from 62% pure EVs in 2016 to 71% in 2021^[4].
• The Autonomous Vehicle (AV) market will grow in lockstep with technological advancements. It is forecasted that by 2030, the global market size for AVs could reach approximately 1.8 trillion dollars^[5].
• As these technologies gain wider adoption, numerous key segments beyond the vehicle manufacturers are poised to benefit. These encompass electric vehicle components, such as electric drivetrains, batteries, fuel cells, chemicals, and raw materials, along with companies contributing to AV technology, including sensors, mapping technology, AI, and advanced driver assistance systems. Furthermore, ride-share platforms and network-connected services for transportation will also experience positive effects stemming from the growth of the AV market.

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