This week, the dollar extended its losses following disappointing U.S. retail sales data. In the view of experts from investment firms, the weakening of the dollar is likely to continue, especially in a context of further rate cuts by the Federal Reserve (Fed).
Tim Murray, Capital Markets Strategist in the Multi-Asset Division at T. Rowe Price, outlines four reasons why he believes the U.S. currency will likely continue to weaken after nearly 16 years of steady appreciation: “The recent decline reflects a combination of structural and cyclical factors, suggesting that the move may have further room to run rather than representing merely a short-term correction. First, fiscal concerns are increasingly putting pressure on the currency. Second, monetary policy expectations are becoming a clear headwind. Third, political dynamics are influencing foreign demand for dollar-denominated assets. And finally, global capital flows are acting as an additional source of pressure,” Murray notes.
However, from a valuation perspective, this expert believes the dollar remains elevated relative to its own history and against most major currencies. “Even after its recent weakness, it remains expensive by historical standards,” he adds.
The outlook of Axel Botte, Head of Market Strategy at Ostrum AM (an affiliate of Natixis IM), is similar: “The greenback will likely face structural headwinds in the coming years. The dollar’s carry against the euro will fall to around 100 basis points and will turn negative against the pound sterling and the Australian dollar this year.” For Botte, the dollar’s status as a safe-haven asset is being called into question and it may decline at the same time as U.S. equities and bonds.
“This is the phenomenon known as ‘sell America,’ which has shown that the dollar is no longer the ultimate safe-haven currency. U.S. exceptionalism will also be tested as the AI boom comes under greater scrutiny from investors. Dollar hedging flows could increase, and valuation metrics suggest that the greenback has room to adjust downward,” Botte adds.
Investor options
If this outlook materializes, the dollar’s rate advantage over other currencies would consequently erode. In addition, global investors’ efforts to diversify could add further downward pressure and open up tactical opportunities in higher-yielding currencies. “With dollar weakness likely to persist, investors should review their currency allocations and consider the benefits of diversification. For those with an affinity for gold, we consider an allocation of up to a mid-single-digit percentage within a diversified portfolio to be appropriate,” says Mark Haefele, Chief Investment Officer at UBS Global Wealth Management.
In Murray’s view, for investors considering ways to potentially hedge against a weaker dollar, increasing exposure to assets outside the U.S. may offer diversification benefits. “Emerging market and local currency bonds can benefit directly from dollar depreciation, while international equities provide both equity returns and potential currency gains. After years of dollar strength that led some investors to reduce their international exposure, a sustained period of weakness could encourage a reallocation toward global markets.”
Undoubtedly, however, the key task for managers and investors will be to continue monitoring the behavior of the dollar. The U.S. asset manager Muzinich & Co reminds that “in the macroeconomic sphere, the key indicator to watch will be the U.S. dollar, as a sovereign currency is often seen as a barometer of both the health of the economy and confidence in the administration that governs it.”
Fund manager Schroders has announced an agreement with Nuveen under which the U.S. firm will acquire the British company for £9.9 billion ($13.5 billion). The founding family would sell its shares, bringiqng an end to an era for the 222-year-old firm.
Schroders shareholders will receive 590 pence per share in cash, plus dividends of up to 22 pence, valuing the company at 612 pence per share. This represents a 34% premium to Wednesday’s market closing price.
Nuveen stated that the deal would create a leading platform for public and private assets with greater geographic reach across the Americas, Europe, and Asia-Pacific. The firm said it has received irrevocable commitments in support of the deal from Schroders’ largest shareholder group, which controls 41% of the shares through various family trusts.
The offer document states that the businesses of Nuveen and Schroders are highly complementary and that the transaction “represents an opportunity to combine their strengths in order to accelerate growth, better serve clients, and create one of the largest active asset managers globally.” The combined group will have nearly $2.5 trillion in assets under management, balanced evenly between institutional and wealth channels. According to the proposed timetable, the transaction is expected to become effective during the fourth quarter of 2026.
BNP Paribas served as financial adviser to Nuveen, while Wells Fargo and Barclays advised Schroders.
Elizabeth Corley, Chair of Schroders, commented that the Group resulting from the combination of Schroders and Nuveen “will bring together two successful companies with shared values and highly complementary strengths to create a new global leader in public and private investment management. Following Schroders’ tradition, London will remain the center of the new combined entity, and the transaction will provide an attractive cash premium to our shareholders, reflecting the value of our business and its future prospects. The Schroders Board is confident that this is the right step for our shareholders, clients, and employees.”
For his part, Richard Oldfield, Group CEO of Schroders, stated that “in a competitive environment where scale can help deliver benefits, we see in Nuveen a partner that shares our values, respects the culture we have built, and that we believe will create exciting opportunities for our clients and employees.” The executive added that the transaction “will significantly accelerate our growth plans to create a leading public-private platform with broader geographic reach and a strengthened balance sheet. Together, we can create an exceptional opportunity to provide clients with a broad range of high-quality investment solutions that meet their evolving needs.”
Likewise, William Huffman, CEO of Nuveen, stated that through this “exciting transformational step for our two distinguished firms, we look forward to welcoming Schroders to the Nuveen family. By bringing together our platforms, capabilities, distribution networks, and complementary cultures, we will create an extraordinary opportunity to enhance the way we serve our collective clients through access to new markets, a strengthened product offering, and a greater depth of investment talent.” He also said that the transaction “is intended to unlock new growth opportunities for institutional and wealth investors worldwide, equipping our leading and differentiated public-to-private platform with a broader global presence,” according to the transaction statement.
Schroders CEO Richard Oldfield will remain at the helm of the firm following the closing of the deal. London will serve as the headquarters of the combined group outside the United States. Nuveen and Schroders will assess opportunities for collaboration and effective integration during the 12 to 18 months following completion of the transaction. During that period, Schroders is expected to continue operating as an independent company.
Investment managers’ budgets for alternative data will continue to increase this year, consolidating the strong growth of the past two years, according to new research by Exabel and BattleFin, two platforms specializing in alternative data.
Around 85% of the investment managers and analysts surveyed in the global study state that their budgets will increase this year, and 33% foresee substantial growth, according to the report “Alternative Data Buy-side Insights & Trends 2025” by Exabel and BattleFin. This increase adds to the recent expansion of budgets. The study, which included fund managers in the U.S., the U.K., Hong Kong, and Singapore with a total of $820 billion in assets under management, revealed that 43% of respondents reported a budget increase of between 50% and 75%, while 36% indicated that their budgets grew between 25% and 50% during the period analyzed.
The report by Exabel, which was acquired by BattleFin in December of last year, identified that one of the key areas of budget growth is likely to be investment in third-party software systems for data analysis. Currently, 66% of the firms surveyed use third-party software as part of their solutions, compared with 51% that use internally developed systems and 51% that use systems provided by data vendors. However, the research also revealed that 59% of respondents still use basic tools and legacy systems, such as Excel and Tableau, to analyze alternative data.
This landscape appears to be changing: 85% of respondents predict that their use of third-party systems will increase over the next five years, and 15% expect a drastic increase in their adoption for data analysis. The main reason is their greater cost-effectiveness, mentioned by 87% of respondents. In addition, 62% believe that these systems offer a more consistent way of working with different types of data, while 52% consider them more effective than internal systems.
In fact, senior management at the firms surveyed supports the increase in budgets: 98% state that they are very or fairly committed to the use of alternative data for investment research. Likewise, 84% have a head of alternative data on their teams, while only 11% admit not having one.
When allocating budgets for the acquisition and management of alternative data, the survey revealed that approximately 62% of firms allocate between 25% and 50% of their resources to purchasing data, while 45% indicate that their firm allocates between 25% and 50% of the budget to technology and software. And 49% indicated that their firms allocate between 10% and 25% of the budget to hiring staff to analyze and manage alternative data.
In light of these results, Tim Harrington, CEO of BattleFin & Exabel, commented: “The demand for alternative data continues to grow globally, with investment managers increasing their budgets year after year both to acquire and to manage a growing variety of datasets. The main challenges include resource allocation, data standardization across different sources, and the use of third-party analytical tools. We are committed to harnessing the power of alternative data to deliver actionable insights and generate value. In today’s dynamic market environment, accessing high-quality data is crucial to gaining a competitive advantage and unlocking alpha.”
Below is a table showing how the firms surveyed distribute their budgets for the acquisition and management of alternative data.
In April 2025, the Citi GPS report: Digital Dollars anticipated that it would be the moment for institutional adoption of blockchain technology, with stablecoins acting as a decisive catalyst in this transformation. One year after this prediction, recent events and data confirm that this revolution is occurring at a rapid pace, driven primarily by digitally native companies, technological advancements, and an increase in transactional activity.
The volume of stablecoin issuance has experienced remarkable growth, rising from approximately $200 billion at the beginning of 2025 to nearly $280 billion today. This momentum has led the Citi Institute to revise its projections for total stablecoin issuance in 2030, adjusting the base case to $1.9 trillion, up from the initially forecasted $1.6 trillion, and the optimistic scenario to $4.0 trillion, compared to the previous $3.7 trillion. This growth reflects both the partial relocation of U.S. dollar cash, domestic and offshore, and the gradual replacement of short-term international liquidity with stablecoins denominated in dollars and other local currencies, in addition to a boom in crypto ecosystem adoption and increased cryptocurrency trading.
A New Financial Ecosystem: Coexistence and Evolution
The evolution of digital assets such as stablecoins and bank tokens is marking a shift. However, far from representing a threat to the traditional financial system, these innovations contribute to reimagining and strengthening it. The reality points toward integration and coexistence of models.
Although stablecoins offer a valuable financial tool, especially for digital companies, investors, and households in emerging markets seeking an efficient and secure option, they are not a universal solution for all markets. In many countries, national payment systems already provide fast, secure, and low-cost solutions. In contrast, cross-border payments continue to present challenges that both fintechs and large banks are addressing through advanced technologies.
For certain market segments, bank tokens offer a simpler alternative aligned with traditional infrastructures, and transaction volumes using these tokens are expected to surpass those of stablecoins by 2030. Rather than competition, this diversity of formats represents progress toward smarter, more agile, and programmable finance.
Market Projections and Transactional Activity
The Citi Institute estimates that stablecoins could support nearly $100 trillion in annual transactional activity in its base-case scenario for 2030. In the optimistic scenario, this figure could double to $200 trillion, placing stablecoins at the center of the global financial infrastructure of the future.
At the same time, bank tokens, which combine the trust, familiarity, and regulatory security of traditional bank money, are projected to reach similar or even higher volumes. These tokens could play a key role in the financial ecosystem, especially in corporate transactions where institutional trust and regulation are fundamental.
Programmability and Efficiency: The Key for Corporate Treasuries
One of the most valued features for large corporations is the programmability of digital money, which enables real-time settlements and reconciliations, with built-in regulatory compliance at the point of transaction and significant friction reduction. Both stablecoins and bank tokens are positioned to offer these capabilities, which will attract growing interest from corporate treasuries seeking to optimize cash management and improve operational efficiency.
Dollar Dominance and Geographic Expansion
U.S. dollar denomination will continue to predominate in on-chain money volumes, generating incremental demand for U.S. Treasury bonds. Nevertheless, the relevant activity is not limited to the United States. Innovative financial centers such as Hong Kong, the United Arab Emirates, and other emerging jurisdictions are undergoing rapid development in blockchain technology adoption, reflecting a diversified and global geographic expansion.
Context and Comparison With Traditional Flows
While the projected annual turnover figures for stablecoins and bank tokens, $100 trillion and over $100 trillion, respectively, may seem astronomical to the general public, in context they remain smaller compared to the daily flows handled by major banks, which range between $5 trillion and $10 trillion. This highlights the enormous growth potential of on-chain digital money, which still represents a fraction of total global payment volumes.
The recent correction in the tech sector reflects more of an adjustment than a structural break in the AI investment cycle. In this sense, investment firms have no doubt: artificial intelligence will continue to be one of the most important drivers of technology and the economy this year. According to Nicolas Bickel of Edmond de Rothschild, major cloud companies and OpenAI are making historic investments in AI infrastructure, more than $1.6 trillion between 2025 and 2028. “These investments are already yielding results: AI is improving cloud services, e-commerce, and digital advertising, and many software companies that have adapted to AI are seeing growing interest in their products,” he notes.
However, as AI becomes more tangible, market corrections have also arrived. Although the S&P 500 had only dropped 3% from its highs as of Thursday’s close, the situation feels much worse. “That 3% loss is a combination of much steeper declines this year in areas that had attracted most assets, such as bitcoin (-49%), software giants (-25%), and the Magnificent 7 (-6%). Meanwhile, the shares of the other 493 companies have risen between 1% and 6% since the market lows in November, which is even more reassuring. We consider the current tech correction to be healthy, though not yet complete,” explains the Federated Hermes equities team.
A Healthy Correction
Although some experts compare the current situation to the year 2000, many argue that today’s conditions are significantly different: listed companies driving the current capex boom often have strong cash flows and the financial flexibility to invest, even if some of that spending ends up being misallocated. One such voice is Fabiana Fedeli, CIO of Equities, Multi-Asset and Sustainability at M&G Investments, who acknowledges that concerns about increased capex and software companies overpromising on AI-driven revenue are valid, but believes we are not at a turning point. In her view, this is more of a reset, as markets reassess their expectations.
“The speed of market movements has increased, amplifying volatility and contributing to the magnitude of the recent purge. These adjustments are now broader and faster than in previous cycles, and investors will need to sharpen their ability to distinguish noise from truly meaningful signals,” she adds.
For Fedeli, this is not the end of the AI bet, but rather an expansion of the opportunity set beyond the narrow group of large U.S. tech companies that have captured investor attention. “The race for AI is global, and while we still believe that some of the ‘enablers’ of AI, the hardware makers building the supporting infrastructure, still hold potential, we increasingly see opportunities among AI beneficiaries: companies across sectors like consumer, media, financials, materials, and industrials that are deploying AI to reduce costs, increase revenues, and optimize customer acquisition. Moreover, AI investment is global, and we must look beyond the U.S. market. That said, the current relative weakness of U.S. tech will offer active investors new opportunities, as broad-based innovation continues to show structural strength. This is a recalibration, not a trend reversal, and the main beneficiaries of the AI investment boom may not be the capex spenders, but those best positioned to leverage it,” says the M&G expert.
Meanwhile, Federated Hermes analysts expect the market shift toward smaller-cap and value stocks to likely continue for some time. One reason supporting this “healthy correction” view relates to the evolution of AI itself. For example, they explain that hyperscalers are beginning to move away from the “asset-light” model that once made them so attractive: high incremental margins, modest capital intensity, and extraordinary free cash flow generation. That landscape is changing quickly.
“In addition, the software sector faces a mix of serious issues that are underappreciated. First, many companies are still absorbing excess licenses sold during the remote work surge of the pandemic. Renewal cycles remain focused on optimization and downsizing, not expansion. Second, AI is threatening the traditional license-based model. And also, the market is broadening as companies outside the tech realm, which had previously led the market, are now improving,” they add.
Finally, Thomas Hempell of Generali AM acknowledges that the market can be volatile due to the concentration of investments in tech companies and their high valuations. But unlike the dot-com bubble of the 1990s, today’s growth is supported by real earnings. AI has enormous potential to transform businesses and boost productivity, even in an economic environment that remains favorable.
Outlook for This Year
These recent adjustments do not undermine the case for investing in AI. According to Paddy Flood of Schroders, the benefits of AI are not always immediately visible. Many companies are using it to make their services more efficient, from virtual assistants to personalized recommendations, without users paying for it directly. “Even if it’s not always seen, AI is already generating economic value throughout the tech chain,” says Flood.
Joe Davis, of Vanguard, notes that AI investment is still in its early stages, much like the early days of the internet or electricity. The next phase will depend on so-called “AI scalers”, companies with the resources to ramp up computing power, data storage, and large-scale AI models. These investments will drive not only technology itself but also related sectors such as semiconductors, data centers, and energy. This marks the beginning of a long-term transformation in the economy.
According to Johnathan Owen, portfolio manager at TwentyFour AM, after a year of AI hype, markets are starting to show discipline. The massive issuance of AI-linked bonds, which could reach between $1 and $3 trillion in the coming years, raises concerns about whether investors can absorb so much supply in such a short period. While demand remains strong, the timing and volume of these issuances could slow price growth and increase credit risks. Owen recommends focusing on essential assets like data centers and infrastructure, carefully evaluating debt levels and risks, as returns may take time to materialize.
Lastly, Mark Munro and Anthony Merola of Aberdeen point out that tech giants are increasingly turning to public bond markets to finance AI expansion, moving away from relying solely on cash flow or private capital. In just the past three months, Meta, Alphabet, Amazon, and Oracle have issued billions of dollars in bonds. They compare the current pace of investment to the internet boom of the 1990s. According to them, the need for funding will continue to grow, driven by costly data centers and rising energy demand. For investors, this means tactical opportunities in short-term, high-quality bonds, while long-term funds will need flexibility to take advantage of major upcoming issuances.
The first data of the year begins to confirm the impact of monetary and fiscal stimulus accumulated in Q4 2025. In particular, the January ISM Manufacturing survey delivered a positive surprise by returning to expansion territory with a reading of 52.6, breaking a streak of 10 consecutive months of contraction.
The rebound is supported by solid fundamentals such as:
New orders surged to 57.1 (an increase of around 10 points).
Production also posted a strong recovery.
Delivery times lengthened, consistent with stronger demand traction.
The “new orders – inventories” spread, a leading indicator of activity, accelerated after a flat 2025.
The employment subcomponent surprised to the upside, although it remains in contraction (48.1). This reinforces the perception of labor market stabilization, in line with recent jobless claims data. However, the figure does not yet confirm a sustained turnaround in manufacturing employment and therefore does not justify a hawkish shift from the Fed.
Labor Market in Progressive Normalization
The December JOLTs report, delayed due to the partial government shutdown, points to stability with nuances of weakness. Job openings declined, although voluntary quits edged up slightly (from 3.19 to 3.2 million), while layoffs did not worsen. The labor market remains in a post-pandemic normalization phase, with structurally lower demand in light of productivity gains.
Inflation: Mixed Signals and Need for Monitoring
The ISM also provides insights into price dynamics. While the prices paid series remains stable, the lengthening of delivery times could indicate early signs of price pressures. This remains an isolated data point, but given the acceleration in growth, it is advisable to monitor for potential second-round effects. The real-time inflation indicator from Truflation continues to trend downward, supporting our thesis of progressive disinflation.
However, a sharp shift in the growth outlook or a negative ruling by the Supreme Court regarding the use of tariffs could put pressure on yields and affect risk assets through:
Increased rate volatility
Less room for Fed rate cuts
Repricing of valuations
For this reason, we maintain a neutral view on equities, awaiting the right moment to increase positions.
Severe Correction in Software Within the Tech Sector
The week was also marked by a sharp correction in the technology sector, particularly in software. Despite the structural strength of the AI investment cycle, software companies experienced a capitulation session on Tuesday, with market capitalization losses exceeding $300 billion.
The decline was triggered by:
New functionalities announced by Anthropic CoWork
Comparisons to the impact of DeepSeek in 2025
Fears of disruption to SaaS models and per-user licensing
Initial drops concentrated in firms such as RELX, S&P Global, Thomson Reuters, and Legalzoom.com, later spreading across the sector and to private equity firms with significant exposure
However, the mass selloff appears to be driven more by panic than objective analysis. Disruption risk is real, but many stocks are already trading at decade-low multiples after a roughly 40% valuation compression. At these levels, much of the potential impact appears to be already priced in.
AI and CapEx: The Cycle Continues
Our view that 2026 will not be the year the AI bubble bursts is further reinforced. Hyperscalers are not only continuing to expand their computational capacity but are also significantly revising their investment plans upward. Alphabet now targets $180 billion, up from the previously expected $116 billion, while Amazon raises its estimate to $200 billion from the previous $150 billion. Altogether, AI investment could exceed $700 billion in 2026.
Toward a Less Concentrated Market
With more dynamic economic growth, the door opens to a more balanced market, where returns are no longer so heavily concentrated in technology and communications. The growing divergence in performance, and valuation, between winners and losers within the AI universe points to increased market selectivity.
The recent decline in software may have been the first step toward a broader rotation: from defensive growth to cyclicals, and from thematic concentration to structural diversification.
In conclusion, the ISM data signals the beginning of a new phase in the economic cycle, with manufacturing emerging from contraction and AI investment far from exhausted. However, concerns around inflationary pressure could resurface, requiring tactical caution and balanced portfolio construction. The key for 2026 will be clearly distinguishing between real opportunities and speculative noise surrounding disruptive technology.
Dynasty Financial Partners has announced the successful closing of a minority capital round, backed by its community of stakeholders, including employees, clients, and partners, as well as several long-term investors and members of its Board of Directors. According to the firm, investors in the round include The Charles Schwab Corporation, BlackRock, J.P. Morgan Asset Management, Abry Partners, Glick Family Office, and Dynasty Chairman Harvey Golub, along with various clients. Fortress Investment Group LLC participated as a new investor. This marks the sixth capital round since Dynasty’s founding in 2010.
The funds raised in this round will be used to strengthen support for Dynasty’s network of partner firms, enabling them to better serve their clients. In particular, they will drive continued growth in talent and advanced AI-driven technology, facilitating the integration of Dynasty Desktop and Core Services; enhance the firm’s investment platform with a focus on private investments and its comprehensive Outsourced Chief Investment Officer (OCIO) services; provide additional growth capital to drive mergers and acquisitions within the network; expand Dynasty Investment Bank; and reinforce Dynasty’s strong balance sheet, positioning the firm to proactively capitalize on future opportunities.
“The future is bright for Dynasty and our network of independent advisors, thanks to the remarkable alignment within our ecosystem, as reflected in this investment round. As more advisors recognize the benefits of being independent RIA advisors, and more RIAs understand the power of outsourcing to grow their businesses, we are committed to ensuring they have every opportunity to build better firms while delivering exceptional care to their clients. We are investing in the best technology, talent, and resources, while strengthening our solid balance sheet to support our clients’ growth ambitions, whether through M&A or succession planning. I am deeply grateful to our investors, team members, industry partners, and clients who have supported us since Dynasty’s early days, making today’s announcement possible,” said Shirl Penney, Founder and CEO of Dynasty.
Dynasty’s network is primarily composed of clients who own and operate independent Registered Investment Advisors (RIAs). These RIAs typically hold majority ownership, control their own economics, own their ADV filings, and have the freedom to manage their client experience model. These clients leverage Dynasty’s integrated technology, services, robust Turnkey Asset Management Program (TAMP), digital lead-generation services, capital solutions, and investment bank.
This integrated RIA platform model provides synthetic scale, allowing RIAs supported by Dynasty to be “Independent, but not alone.” Currently, Dynasty has 58 partner firms in its network, representing over 500 advisors and managing more than $125 billion in platform assets.
In October 2024, Dynasty closed a minority capital round backed by several of its long-term investors and board members, along with three strategic investors, including existing investor The Charles Schwab Corporation and new investors BlackRock and J.P. Morgan Asset Management. While Dynasty currently carries no debt, the firm secured a $125 million corporate credit facility in 2025, backed by a syndicate of financial institutions including UMB Bank, N.A., Flagstar Bank, J.P. Morgan, Citibank, N.A., and Goldman Sachs Bank USA.
“This latest investment round reflects the incredible momentum of the independent movement within the financial advisory industry. The growth of the RIA space is driving positive change for advisors and their clients. Together with the other board members, I’m excited to continue supporting Shirl and the leadership team as they guide our growing network of independent advisors,” added Harvey Golub, Chairman of the Board at Dynasty.
China’s strong close in 2025 keeps the country’s outlook firm for 2026 and its growth target around 4%-5%, driven by technological innovation and investment. Looking ahead to next year, some of the tailwinds expected to support the Asian giant include stronger domestic consumption and improved diplomatic relations with the U.S.
“Although these factors could support the Chinese stock market, policy missteps are always a risk, and companies and consumers should play a leading role in driving growth,” note sources from KraneShares.
Macroeconomic Data: The GDP Deflator
According to Robert Gilhooly, senior economist specializing in emerging markets at Aberdeen Investments, the set of easing measures announced in recent weeks, along with the signal that cuts to key interest rates will occur in due course, will help underpin real GDP growth in 2026.
“However, the outlook for nominal growth may remain more challenging, as illustrated by the record streak of 11 consecutive quarters of negative growth in the GDP deflator. In fact, although recent data on fixed asset investment points to some success in reducing investment in the automotive industry, the economy-wide overcapacity is likely to continue weighing on inflation, partly because the People’s Bank of China (PBOC) appears more willing to allow greater appreciation of the renminbi. The large number of maturing fixed-term deposits opens the door to further interest rate cuts, while protecting banks’ net interest margins (NIM). A key question is whether these significant household savings will flow into the stock market; however, it is likely to be very difficult to spark a slow bull market,” Gilhooly concludes.
In this regard, Ecaterina Bigos, Chief Investment Officer for Asia excluding Japan at AXA IM Core (part of BNP Paribas AM), believes the country’s GDP deflator remains firmly in negative territory, falling for the third consecutive year, marking the longest stretch of broad price declines since the late 1970s.
“For equity investors, the GDP deflator is a key indicator for assessing corporate performance, profit growth potential, and overall market conditions. Despite signs of rising inflation, China continues to face various deflationary pressures. The country’s economy, which has been impacted by the decline in the real estate market and weak consumption, has struggled to emerge from the deflation recorded since the end of the pandemic. Overproduction in certain sectors has led to an oversupply of goods, forcing companies to cut prices to stay afloat,” explains Bigos.
Betting on Technological Innovation
In this context, KraneShares expects China’s 15th Five-Year Plan, scheduled for release in the first quarter, to support the development of high-tech industries, increase technological self-sufficiency, and stimulate domestic demand and inflation. “Efforts to curb overcapacity and downward competition, especially in the solar panel industry, could bear fruit in 2026, potentially resulting in improved corporate profit margins and inflation,” they add.
For now, the draft of this plan suggests that technological innovation and broad economic expansion are key priorities. At the same time, behind the scenes, top government leadership is paying close attention to the growth of domestic consumption.
Focusing on the main goals outlined during the 2025 Central Economic Work Conference (CEWC), an annual economic meeting involving President Xi and the State Council—KraneShares experts highlight deepening the expansion of the “Artificial Intelligence +” policy; reforming policies to support high-quality development while correcting destructive competition; and stabilizing the real estate market through city-specific policies to optimize housing supply, including purchasing part of the existing commercial housing stock for affordable housing use.
“In December, President Xi published an article titled Expanding Domestic Demand Is a Strategic Move. In it, he stated that ‘expanding domestic demand is related to both economic stability and economic security,’ and that domestic demand will be supported, among other measures, by ‘promoting employment and improving social protection,’” they add.
The Relationship with the U.S.
KraneShares experts believe that the restart of diplomatic relations between the U.S. and China could bring greater clarity to global export markets for Chinese goods, the status of their ability to import high-end chips, and reduced volatility in equity markets, especially abroad.
“We believe markets are underestimating President Trump’s desire to reestablish U.S.-China relations. We are optimistic that the trade and national security measures already implemented or underway could give the Administration the confidence to work toward improving long-term relations,” they note. These measures include reshoring automobile manufacturing and other critical industries to the U.S., as well as export restrictions on chips.
“We believe President Trump may expand the trade truce established with President Xi during their meeting in South Korea earlier this year. Although we may see tougher legislative initiatives in Congress, such as the BIOSECURE Act, we think it is unlikely these will seriously derail the White House’s efforts,” they add.
Implications for Chinese Equities
Without a doubt, 2025 was a strong year for Chinese equities, driven by improved confidence, especially in growth and technology sectors. Many investors reallocated their portfolios during the year, although some remain on the sidelines, particularly U.S. investors sensitive to geopolitical headlines. And despite the challenging macroeconomic environment, Chinese equity markets posted returns above 10% in 2025.
In Bigos’ view, this divergence from macroeconomic trends may be due to the strong performance of sectors such as technology, thanks to advances in artificial intelligence, as well as biotech and others that also benefit from anti-involution initiatives. “Moreover, the increase in liquidity has supported the revaluation of companies, as savings have been redirected into equities: a dividend yield more attractive than deposit interest rates is drawing investors. Meanwhile, fixed income returns have declined, market volatility has increased, and the real estate market remains weak, prompting investors to seek alternative investment avenues,” she explains.
Looking ahead to this year, KraneShares experts believe that the 15th Five-Year Plan’s focus on technological self-sufficiency, anti-involution policies that improve corporate earnings, and increased consumer spending will allow for a strong year in China’s equity market. “Meanwhile, we believe the Trump administration will seek to move forward with the reestablishment of diplomatic relations with China, reducing headline risks and allowing some U.S. investors to reallocate their investments,” they emphasize.
For the AXA IM expert (part of BNP Paribas AM), weak confidence in the private sector and among consumers, along with supply-demand imbalances, increasingly limit the potential for reflation and, ultimately, corporate profits. “Reviving domestic demand is essential to achieve sustained long-term growth, but it will still take time to redirect the economy toward higher consumption levels. For now, economic policy remains focused on an investment- and trade-driven growth model, with an emphasis on developing a modern industrial system and achieving technological self-sufficiency. In this context, investors should pay close attention to those areas that benefit from this policy direction and from technological innovation,” concludes Bigos.
Omnibus accounts are one of the central tools in fund distribution, but also a key element when it comes to money laundering. Their main advantage is that they are accounts opened in the name of a financial institution in which the investments of multiple clients are pooled. And although the positions are jointly recorded, the financial institution that holds the omnibus account maintains at all times an individualized internal record that allows the identification of which investments belong to each investor.
This structure explains their relevance for international fund managers. “This system facilitates operations in certain products and markets and is especially common when investing in foreign markets, where institutions usually operate through sub-custodians,” says Maite Álvarez, Director of Financial Regulation at finReg360.
Álvarez acknowledges that there are also drawbacks: “There may be temporary limitations in the availability of financial instruments or in the exercise of the rights associated with them. For this reason, it is essential that investors know whether their investments are channeled through this type of account and are aware of the risks involved.”
However, the balance is clear for asset managers: these types of accounts simplify administrative management and are highly operationally efficient. “For both reasons, the trend we see among managers is to continue using them, while also working to provide these accounts with greater traceability and cooperation among the various actors in the chain. The goal is to combine commercial efficiency with effective control of money laundering risk,” states José Antonio Tuero, Partner of Criminal and Compliance Law at Andersen.
The Chain Links
When it comes to anti-money laundering (AML), the debate centers on who should be responsible for these obligations when distributing third-party funds through these accounts. According to Tuero, there should be no issues because “each part of this chain has a defined area of responsibility for which it is accountable.”
He acknowledges that this may create the impression of diluted responsibility, but insists that the key is for each link to fulfill its own AML obligations: “It is important to remember that we are talking about responsibilities and duties that cannot be contractually transferred to a third party. If we had to identify the most sensitive part of this chain, we could say it is the last link, the one directly in contact with the end client.”
So, how does it work and who conducts due diligence? According to Martín Litwak, CEO of Untitled Collection, we are dealing with an omnibus account opened at any regulated institution, broker, investment fund, etc., where the account holder is the intermediary. “It is important to note that for many years, large global investment managers have used this system for investment accounts, which generally carry a low regulatory risk profile. The problem now is that they are starting to be seen in commercial or transactional accounts,” he clarifies.
Regarding due diligence, he adds: “In theory, it should be the same, but instead of falling on the bank where the omnibus account is held, which will perform its due diligence, but more lightly, since its client is a regulated entity, it falls on the intermediaries, who generally have fewer resources.”
Although this may seem like a “weak link” in the chain, the regulations are clear and increasingly converging. According to Pilar Galán, Partner in Charge of the Asset Management Sector at KPMG Spain, “In the distribution and marketing of investment funds, AML/CFT responsibility lies primarily with the entity that maintains the direct relationship with the end investor. This intermediary, usually the distributor, is responsible for fulfilling identification, verification, and monitoring obligations.”
Galán clarifies that in omnibus models, where the manager only sees a platform as the account holder and not each individual investor, AML obligations toward the investor still fall on the distributor. “The manager performs due diligence on the platform as an institutional client but does not identify the investors behind the intermediary,” she adds. Álvarez also points out that, since the manager lacks individualized client information, the AML obligations fall to the distributing entity, which knows and directly interacts with the investor.
This means that the fund manager typically does not perform KYC on the end investor when the fund is distributed through third parties. However, the manager still has AML/CFT responsibilities. “These focus on managing the laundering risk associated with the fund vehicle itself, defining internal policies and controls, and properly supervising the network of distributors involved in marketing. To do this, the manager must conduct periodic due diligence on these intermediaries and ensure they are correctly applying due diligence measures. Only if the manager sells the fund directly to the investor does it assume onboarding and KYC of the final client,” adds Galán.
In Litwak’s view, the conclusion is clear: “There is often a perception that offshore or cross-border alternatives are chosen to hide, but generally they are selected for their simplicity, flexibility, and legal certainty. History, especially recent history, has shown that financial crimes occur onshore, not offshore.”
Regulation, Supervision, and New Frontiers According to these experts, it is true that regulators are increasingly concerned about the lack of transparency in certain fund distribution structures, especially when multiple intermediaries are involved and omnibus accounts are used, as these structures can make it difficult to identify the end investor and obscure the origin of funds. In fact, regulators such as the SEC have intensified oversight of transactions carried out through omnibus accounts, particularly those involving foreign intermediaries.
“They are also increasingly worried about insufficient oversight that some managers exercise over distributors and platforms, even though these intermediaries are the ones actually conducting KYC and investor monitoring. The growing complexity of platforms and structures has raised supervisory expectations, which now require stronger controls and greater clarity on who is responsible for what in the distribution chain,” says Galán. In this regard, regulators are focusing on international custody chains and the need to improve ultimate beneficiary traceability, especially in omnibus structures. “They aim to prevent the distance between investor, distributor, platform, and manager from creating AML/CFT responsibility gaps,” she notes.
According to Maite Álvarez, “we anticipate a general tightening of governance and control requirements when financial institutions rely on third parties for client services. In light of this, financial institutions may in the future have to apply enhanced selection, due diligence, and ongoing supervision processes to sub-custodians or management companies, that is, to the entities where omnibus accounts are opened.”
As Tuero recalls, there is no fully unified international legislation, but there is a clear convergence in regulatory criteria. In his opinion, the next major frontier in AML lies in the field of cryptoassets. “In Europe, the requirements focus on eliminating effective anonymity in transactions through the regulation of service providers and the traceability of movements, which in practice represents a very significant shift from the original spirit in which these assets were created,” he concludes.
As Part of the Presentation of Its Annual Results, Gonzalo Gortázar, CEO of CaixaBank, Was Asked About the Institution’s Intentions to Grow Outside Spain, Specifically Regarding the Possibility of Opening a Branch in Miami to Serve the Wealth Management Segment. According to What He Acknowledged, For Now, the Institution Is Analyzing It, but Has Not Yet Made a Decision.
“We Have Not Made Any Decision, and It Would Not Be Anything Significant. We Are Not in a Program of Making Acquisitions and Large Investments Abroad. The Only Thing It Would Be, in Any Case, Is to Accompany Our Private Banking Clients; but It Is Not Something That Has Financial or Material Relevance for the Group,” He Clarified in This Regard.
However, He Did Affirm That the Private Banking Business, Which the Institution Refers to as Wealth Management, Is Strategic and Very Important for CaixaBank. “We Have Many Years of Growth and Innovation, Including Our Opening of a Bank in Luxembourg, Which Is Going Very Well, Where We Now Have 5 Billion Euros, and Which Celebrated Its Five-Year Anniversary in 2025. It Celebrated, Last Year, Its Five Years of Existence. Miami Would Represent an Addition to That Strategy, if We Ultimately Decide That It Adds Value to Our Current Business,” He Stated.
According to Gortázar, There Is Currently a Business Opportunity for Private Banking Institutions: “Evidently, There Is a Flow of Immigration and of People From Latin America to Spain at All Levels, Including High-Net-Worth Individuals. How to Provide Them With the Best Service Is the Only Question We Are Reflecting On. But That Will Not Result in Any Material Investment That Moves the Needle.”
Wealth Management Segment
Currently, CaixaBank’s Wealth Management Business Has an International Presence Mainly Structured From Luxembourg, Where It Has a Specialized Bank (CaixaBank Wealth Management Luxembourg) to Serve Clients With Wealth Management and Investment Needs in an International Financial Environment. In Addition, at the Group Level, Its Presence Outside Spain Is Especially Reinforced in Portugal Through Banco BPI, Which Also Serves High-Net-Worth Clients With Its Local Private Banking/Wealth Offering.
