As part of our monthly "Portfolio Recommendations" series, we ask domestic asset managers how they would construct a hypothetical, medium-risk model portfolio for the medium term. The following is the contribution from Apelso Capital Alapkezelő.
Apelso warns that the current enthusiasm around artificial intelligence (AI) is unlikely to represent a permanent break with past patterns: historically, major technological breakthroughs have often been accompanied by bubble formation, and the firm expects the AI era could follow a similar path. Using the Minsky–Kindleberger framework, Apelso assesses the market to be in the euphoria phase, so while it is too early to panic, investors should not ignore the attendant risks.
The note highlights that market corrections are typically driven by falling valuation multiples, especially price/earnings (P/E) ratios, which are often triggered by fears of deteriorating corporate earnings. If P/E ratios fall while profits remain stable, that generally indicates a correction; if earnings per share (EPS) fall in parallel, that signals an elevated risk of a bear market. Apelso observes that recent developments look more like normalization rather than synchronized EPS contraction so far.
The manager also stresses that corporate fundamentals may continue to support equity markets for the remainder of the year, but high real yields and geopolitical risks imply that volatility is likely to persist. Investors did not celebrate after the quarterly results from Meta and Alphabet: the reporting season renewed focus on the financing needs of large AI investments. Both Meta and Alphabet reported negative free cash flow, which added to concerns about the sector’s financing profile, although one-off items affected Alphabet’s number and Microsoft continues to report positive free cash flow.
Apelso points to the latest Federal Reserve SLOOS survey as further evidence that rising external financing needs for capital expenditures are not isolated incidents. If investment cycles increasingly rely on external funding, markets may penalize the resulting increase in leverage.
On the macro side, Apelso notes that U.S. growth today is substantially supported by the AI ecosystem, which creates a vulnerability: the gap between business investment and real retail sales is widening, and growth composition may have become more concentrated. Consumption remains the largest component of GDP and is currently relatively stable, but aggregate statistics mask a K-shaped divergence in consumption patterns — less than half of aggregate consumption is driven by debt-fueled spending, while borrowing costs are rising and could limit future consumption growth.
Global risks include the ongoing, unresolved conflict in the Middle East, whose short-term supply shocks are gradually embedding into consumer prices and could pressure already fragile developed-market bond markets. U.S. real yields are approaching 2008 levels, which can compress equity valuations and raise the cost of capital.
Apelso suggests China could emerge as a beneficiary because the Chinese bond market may offer cheaper financing relative to developed markets for capital-intensive AI companies, potentially boosting demand for panda bonds.
Domestically, the manager reiterates strong commitment to euro adoption and advises anyone skeptical about next year’s budget proposal to investigate the details.
Portfolio positioning
Compared with the previous month, Apelso kept a neutral equity weight but shifted part of its regional exposure from the region toward developed markets. The stated current currency exposures of the model portfolio are:
- HUF exposure: 67.5%
- EUR exposure: 12.5%
- USD exposure: 15%
- Other currency exposure: 5%
Apelso emphasizes that the allocation is for information only and that the publication does not constitute investment advice or a recommendation. Detailed legal information is provided in the original disclosure.
Tags in the statement include: earnings releases, artificial intelligence, bubble, equity market, euro adoption, portfolio recommendations, bear market, panda bond, model portfolio, Apelso Capital Alapkezelő.
