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Election Year and AI Investment Strategies Star in American Century's Third Quarter Investment Outlook

American Century's chief investment officers share insights on navigating election year volatility and AI surprises


Kansas City, MO

In its third quarter investment outlook, American Century Investments®, the $245 billion1 global asset manager, shares investment strategies for election- and AI-related surprises. According to American Century, investors can expect political rhetoric to ramp up, both in the U.S., where both party conventions will occur this quarter, and across the globe, which will see head-of-state elections this year in countries representing 60% of the global economy. Despite any changes these elections may portend, American Century would not recommend political prognostication portfolio adjustments.

"Historical data indicates that market volatility tends to pick up through Election Day but typically decreases afterward2," said Victor Zhang, chief investment officer of American Century. "The same research also shows that staying invested throughout the election year has delivered better results than attempting to maneuver in and out of the market. So, we wouldn't recommend that investors adjust their portfolios in anticipation of or in response to the turmoil."

Staying the course despite election twists and turns; political risk small part of overall investment analysis

One reason moving in and out of the market can do more harm than good is because of the difficulty of accurately predicting a series of outcomes: who will win an election, the policies the winner will be able to put in effect and the impact those policies would have on business performance.

"India's surprise results remind us that investors shouldn't bet on election outcomes with their portfolios. A lot could change between now and November; even those who correctly guess the outcome would have difficulty handicapping the policy impacts on individual businesses," said Zhang. "In the end, the performance of individual companies drives investment results."

Keith Lee, global growth equity co-chief investment officer of American Century, explains that though actively monitoring risk exposure and quantifying political risks such as the impact of tariffs are important, the most significant part of the analysis is the individual security.

"We believe the companies we own have the potential to outperform their competitors because they're strong companies, not because of political factors. Our North Star is owning good businesses. We believe such companies — those with strong competitive positions and strong balance sheets — possess fundamental business strengths that make them well-positioned to ride out many risks," writes Lee.

Passive investments may miss AI surprises

The chief investment officers at American Century make the case to look beyond the biggest, most obvious winners in the AI theme to under-the-radar smaller cap companies.

"AI is driving earnings growth for small- and mid-sized companies in developed and emerging markets. Many are businesses that investors using a passive investment approach might miss," said Zhang.

Additionally, Kevin Toney, global value equity chief investment officer of American Century, points out that AI may boost the "relatively snoozy" utility sector with a growing demand for electricity for the first time in decades. However, utilities may need more transmission capacity and regulated utilities may be more limited than independent power producers.

"For now, we think utilities can be an unexpected beneficiary in the wider frenzy over AI. For the first time in decades, AI may drive significant new demand for electricity," said Toney. "Other factors are also driving electricity demand. Electric vehicles will significantly increase the need for electricity, especially as demand for them picks up from their current doldrums. The reshoring of manufacturing and supply chains, such as semiconductor plants and electric vehicle plants, is also amplifying electricity needs. But AI leads the surge."

For more investment insights for the third quarter, read the full American Century investment outlook, with insights on:

About American Century Investments

  • Who We Are

    American Century Investments is a leading global asset manager focused on delivering investment results and building long-term client relationships while supporting breakthrough medical research.

  • Quick Facts

    Founded in 1958, American Century Investments' 1,400 employees serve financial professionals, institutions, corporations and individual investors from offices in Kansas City, Missouri; New York; Los Angeles; Santa Clara, California; Portland, Oregon; London; Frankfurt, Germany; Hong Kong; and Sydney.

  • Management

    Jonathan S. Thomas is president and chief executive officer, and Victor Zhang serves as chief investment officer.

  • Giving Back

    Delivering investment results to clients enables American Century Investments to distribute over 40% of its dividends to the Stowers Institute for Medical Research, a 500-person, nonprofit basic biomedical research organization. The Institute owns more than 40% of American Century Investments and has received dividend payments of more than $2 billion since 2000.

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Assets under supervision as of 5/31/24.

Data from 11/6/1931 - 11/3/2021. Source: FactSet, U.S. National Archives, Library of Congress, American Century Investments.

References to specific securities are for illustrative purposes only and are not intended as recommendations to purchase or sell securities. Opinions and estimates offered constitute our judgment and, along with other portfolio data, are subject to change without notice.

International investing involves special risks, such as political instability and currency fluctuations. Investing in emerging markets may accentuate these risks.

Historically, small- and/or mid-cap stocks have been more volatile than the stock of larger, more-established companies. Smaller companies may have limited resources, product lines and markets, and their securities may trade less frequently and in more limited volumes than the securities of larger companies.

Diversification does not assure a profit nor does it protect against loss of principal.

Generally, as interest rates rise, the value of the bonds held in the fund will decline. The opposite is true when interest rates decline.

Past performance is no guarantee of future results. Investment returns will fluctuate and it is possible to lose money.

The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.

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