Is global investor optimism rational enthusiasm or a prelude to market overheating?

Is global investor optimism rational enthusiasm or another prelude to market overheating? Is the euphoria surrounding artificial intelligence still fueling fundamentals, or is it starting to resemble the familiar pattern of "irrational exuberance"? Or are economies actually entering a new phase of the cycle this time, supported simultaneously by accommodative monetary policy and expansionary fiscal measures?

In the October market commentary, experts VIG/C-QUADRAT TFI examines the global trends that shape investor behavior—from the accelerating AI revolution and new records for the MSCI World Index to the surprisingly weak performance of the domestic stock market. The study includes:

• analysis of the impact of global monetary and fiscal policy easing on risk appetite,
• assessing the sustainability of the AI-driven growth trend,
• comparison of the condition of developed and emerging markets,
• a look at the factors behind the weakness of the Polish market against the backdrop of the global bull market,
• and assessing the growing political and geopolitical risks for local investors.

Below we present selected information from the report.

GLOBAL ACTIONS

Rational enthusiasm

Global stock markets continued their upward march in September, supported by improving investor sentiment. The MSCI World Index rose around 3% to new all-time highs, with gains broad-based across both developed and emerging marketsA key factor supporting risk assets was the acceleration in AI and the continued loose financial conditions supported by the global monetary and fiscal easing cycle.

In recent weeks, the market has been dominated by information from the world of artificial intelligence, and the spotlight has once again shifted to OpenAIThe company significantly accelerated its strategic expansion, signing partnerships with Nvidia and AMD to provide computing power and expanding its product portfolio, releasing the Sora 2 model, the AgentKit toolkit, and further expanding into a super-application for e-commerce. The apparent acceleration of technology development towards AI agents and visual models for robotics will require much more computing power than previously thought.On the other hand, there's a significant amount of skepticism about the feasibility of financing such large investments and achieving an adequate return on investment. A similar level of complaints was evident a year or two ago, but the thousands of talents working on AI technology regularly surprise naysayers.

Increased fiscal impulse

For many investors, the current market situation may seem irrational, which reinforces the belief that they should approach the market cautiously and not participate in the bull market. A good example is a statement by Alan Greenspan from 1996, then chairman of the Federal Reserve. In a famous speech, he warned that the stock market could be in a state of irrational exuberance, driven by investor emotions rather than economic fundamentals. Greenspan used this phrase at a time when US stock market indices—especially Nasdaq — began to grow rapidly, influenced by the development of the technology sector and the internet. However, over the next three years, the Nasdaq continued to grow rapidly—by as much as 460% until the dot-com bubble burst in 2000. Therefore, the market may remain irrational longer than we think. It's worth noting that almost six years after this famous statement, the Nasdaq index bottomed out at almost the same level after the bubble burst, around 800 points.

At the same time, we are observing an increase in fiscal impulse almost everywhere. A good example is Japan – the new Prime Minister, Sanae Takaichi, who is a supporter of loose fiscal policy, loose monetary policy and deregulation of the economyIts approach is reminiscent of the direction taken by the Donald Trump administration in the US – with a strong emphasis on supporting economic growth and the labor market, even at the cost of a larger deficit. As a result, fiscal and monetary policy in many countries is now working in the same direction, creating exceptionally favorable conditions for risky assets – particularly stocks and industrial commodities.

VIG/C-QUADRAT TFI managers conclude that the environment for equity markets remains constructive. Global monetary easing, expansionary fiscal measures, and technological euphoria surrounding artificial intelligence create a mix favorable to a continuation of the upward trend. In the short term, the market may encounter technical headwinds after such a strong rally, but structurally, investors remain in an environment where both monetary and fiscal policy are playing for the same goal.

NATIONAL ACTIONS

Only decent in a very strong global stock market

The weakening sentiment in the domestic stock market translated into the exceptionally weak performance of the index compared to other emerging markets, and particularly the Chinese stock market. Interestingly, the domestic stock market was a partial beneficiary of China's weakness in the first half of the year. Now, the situation has reversed – mainly due to the very strong interest in technology companies in China, which demonstrate not only excellent financial results but also innovations in the field of AI.

KGHM – our darling in the raw materials boom

The only bright spot on the return chart was KGHM, which rose by about 25% last month. It is our only representative of the raw materials industry that mines not only copper but also gold and silver. All this is due to the very dynamic growth of the above-mentioned industrial and precious metals in recent months.However, it's worth noting that the price increase was driven not only by market conditions but also by the disaster at the Indonesian Grasberg copper mine. As a result, the supply/demand balance in the copper market has been disrupted until at least mid-2026.

There is no SI, so there is no impulse for further strong appreciation of domestic companies

In summary, the residual exposure to the AI ​​industry in Poland and the limited exposure to the commodities market make VIG/C-QUADRAT TFI managers believe that the coming quarters on the domestic equity market will be challenging. Why? Because we are not taking advantage of favorable market conditions to drive growth, and risks (political and geopolitical) are mounting.

Source: VIG/C-QUADRAT TFI Market Commentary