The path of least resistance
In nature, water finds its way downhill, effortlessly, following the path of least resistance. Investors seem to be doing much the same. Rather than fighting the current, they are flowing with it, carried by the powerful tide of artificial intelligence (AI) enthusiasm and a more resilient macro environment than expected. The story of 2025 so far is one of remarkable resilience. Equities have extended their gains year-to-date in October, led by the technology heavyweights that dominate the AI narrative. Investors, equipped with optimism and liquidity, appear convinced that innovation will outrun valuation risks and cyclical slowdowns.
Macroeconomic conditions, too, have cooperated. Inflation is moderating further, labor markets are softening without breaking, and central banks stand ready to intervene if needed. Interest rates and yields have edged lower, credit spreads remain historically tight, and volatility has returned to subdued levels. With few immediate threats to the risk-on mood, the easiest trade, psychologically and mechanically, has simply been to invest.
Yet this effortless ascent carries its own irony. The path of least resistance can, at times, lead straight into complacency. AI has become both the engine and the excuse, a catch-all narrative that smooths over every bump in the road. Financial markets, supported by the promise of exponential technological progress, may be underestimating how quickly sentiment can shift once reality starts to demand proof of profits rather than promises.
For now, gravity still seems to work in reverse. The financial market keeps climbing, driven higher not only by fundamentals but by faith in technology, in policy pragmatism by central banks and governments, and in the idea that the easiest path remains the right one. Still, it may be prudent to pause and look around. Staying invested remains key and prudent advice but so is reassessing portfolio structure. Diversifying beyond the AI theme may prove the wiser route, not out of skepticism toward AI, but to ensure balance and resilience. Enjoy the read.
Kind regards,
Gzim Hasani, CEO
Bekim Laski, CFA, Chief Investment Officer
