Market insights – what’s piquing interest
With markets hitting record highs, debt warnings echoing, and artificial intelligence (AI) reshaping everything, there’s plenty to unpack. Here’s a quick look at four key topics of investor conversations.
Ray Dalio’s debt warning and the case for gold and bitcoin
The billionaire founder of hedge fund leviathan Bridgewater Associates, Ray Dalio, is a man fond of predicting recessions and crises. His are a reminder that in order to be an accurate forecaster, you merely have to forecast often. Eventually, you’ll be right, just as a stopped clock is right twice a day.
And he’s at it again. His latest? A warning that the U.S. economy’s ballooning federal debt – projected to cost US$13.8 trillion in interest payments over the next decade, per the Congressional Budget Office – could trigger an “economic heart attack” not yet priced into bond or currency markets. His advice: rethink the traditional 60/40 portfolio and allocate 15 per cent to gold and Bitcoin for diversification.
For what it’s worth, I think gold is at risk from a pullback in the short term, due to some bubble-like price behaviour and Bitcoin may rise to, say US$130,000, but the downside is greater, suggesting some profit taking could be wise. But this is about Dalio’s longer term views.
Dalio’s logic hinges on the devaluation of money. Gold, a historical hedge against inflation, and Bitcoin, increasingly seen as “alternative money,” both serve as stores of value in uncertain times. “I’m strongly preferring gold to Bitcoin, but that’s up to you,” he said on The Master Investor Podcast. He owns both but leans heavier on gold, citing its proven track record. Still, he’s clear: don’t overload on either – diversification is key.
Both assets have performed well in 2025, each up about 25 per cent year-to-date (YTD). Bitcoin’s surge, in particular, has caught attention, with some analysts predicting a climb past US$200,000 by year-end, fueled by corporate and national adoption.
Meanwhile, Dalio’s is wary of equities, particularly the Magnificent Seven (think Alphabet, Amazon, Meta). “They’re expensive relative to even optimistic future cash flows,” he noted, echoing his many earlier warnings.
Tariffs: who pays the price?
Tariffs are back in the spotlight, that is, if they ever left. When markets reach epic price-to-earnings (P/E) multiples – they are again nearing two standard deviations from the mean since 1950, for the S&P 500 – you’ll find investors and analysts scouring the data to pick out the positives. This helps to justify why high multiples might, this time, be deserved.
That’s happening again everywhere. One example is with respect to tariffs. Remember, back in April when Trump’s liberation day tariff announcement caused the S&P 500 to fall 12 per cent in just a few days and 19 per cent from its February highs? Well, now analysts are suggesting tariffs averaging 15 per cent might not be as inflationary as feared.
Morgan Stanley’s Mike Wilson frames tariffs as an “import tax” split between exporters, importers, and consumers.
Don’t believe the optimism.
But I’ve seen reports that exporters, particularly in China, are resisting cost-sharing due to thin margins. Meanwhile, Adidas warned this week that it may hike prices in the U.S. as it faces a US$231 million increase in costs in the second half of 2025 in connection with tariffs.
Importers and consumers, then, are likely to bear the brunt. The Yale Budget Lab estimates tariffs could add US$2,400 annually to household costs. Meanwhile, companies like Stellantis, which reported a US$1 billion hit from tariffs, are already feeling the squeeze.
For consumer-facing firms, pricing power is critical. Those unable to pass costs to customers will see gross margins erode, while others with strong brands could fare better. Despite Trump’s self-imposed deadline this week for settling tariffs with 200 trade partners, trade talks are ongoing, with clarity unlikely until early 2026.
Investors will monitor companies’ ability to absorb or offset tariff costs – whether through price hikes or operational efficiencies. Sectors like retail and autos are particularly exposed.
Microsoft’s AI-Powered surge
Microsoft’s latest earnings report is a masterclass in execution. The company closed its fiscal year with a blowout quarter: revenue up 18 per cent year-over-year (YoY) to US$76.4 billion, beating estimates by US$2.6 billion. Azure, its cloud powerhouse, grew 39 per cent, outpacing guidance, while Microsoft Cloud now accounts for 61 per cent of revenue, up four percentage points from last year. Earnings per share hit US$3.65, a US$0.27 beat, with operating margins climbing to 45 per cent despite heavy AI investments.
Azure’s growth is the headline, driven by enterprise demand for cloud infrastructure. Management didn’t break out AI’s specific contribution this quarter, but Azure’s US$75 billion in trailing 12-month sales (up 34 per cent) underscores its dominance. For context, Google Cloud trails at US$49 billion, and Amazon’s AWS leads at US$112 billion. Microsoft Copilot adoption is accelerating, boosting Microsoft 365’s average revenue per user, while commercial bookings soared 37 per cent to over US$100 billion.
Challenges remain. Data centre shortages are capping cloud growth, and capex jumped 27 per cent to US$24.2 billion as Microsoft races to meet AI demand. A rift with OpenAI, whose losses are hitting Microsoft’s books (US$1.7 billion in “other expenses”), adds uncertainty, especially with GPT-5’s imminent release, where Microsoft holds exclusive access.
Microsoft’s story is about execution and scale. Its diversified revenue streams – cloud, gaming, productivity – offer resilience, but capacity constraints and OpenAI’s costs warrant watching. With FY26 guidance pointing to double-digit growth, Microsoft would be expected to remain a core holding for those betting on AI’s long-term payoff.
GLP-1s: The next frontier in obesity drugs, or are they?
GLP-1 drugs like Ozempic, Wegovy, and Zepbound have gone from niche to blockbuster, driving massive gains for Novo Nordisk and Eli Lilly. The obesity drug market, projected to hit US$130 billion by 2030, is reshaping the pharmacueticals industry – as well as impacting consumer behaviour in industries like apparel. These drugs deliver. An estimated 15–20 per cent sustained weight loss is now standard, a feat once limited to surgery.
But there’s a catch. Up to 40 per cent of weight lost on GLP-1s comes from lean muscle mass, raising concerns about long-term health, strength, and metabolic function.
The next wave of innovation is tackling this head-on. Companies are developing therapies to pair with GLP-1s, aiming to preserve or even build muscle. Myostatin inhibitors like bimagrumab and trevogrumab are showing promise in preclinical trials, potentially revolutionising obesity treatment by enhancing muscle growth alongside fat loss.
A few recent studies suggest resistance training and high-protein diets can help, but pharma’s push for combination therapies could redefine “best-in-class.”
There’ll be alpha opportunities here. The obesity market is now crowded, but firms solving the muscle-loss problem could capture outsized returns. Keep an eye on clinical trial readouts and partnerships in this space.
The AI arms race: hyperscalers go all-in
Meta’s Mark Zuckerberg is making headlines with US$100 million salary offers for top AI talent – more than what’s paid for some entire sports teams. According to Factset, hyperscalers like Meta, Amazon, Microsoft, and Alphabet are projected to spend US$317 billion on capital expenditure (capex) this year, doubling estimates from ChatGPT’s debut in 2022. That’s 1 per cent of U.S. Gross Domestic Product (GDP).
Alphabet upped its AI-related capex by US$10 billion to US$85 billion, signalling no one’s blinking in this race. The Magnificent Seven (six if you exclude Tesla) have driven U.S. market gains, but their spending raises a trillion-dollar question: Will these bets yield above-market returns? Remember, the higher the price you pay, the lower your return.
Free cash flow and earnings ultimately drives stock value, and hyperscalers are burning cash to be the AI supreme leader. A scare earlier this year – when China’s DeepSeek model rattled markets, tanking Nvidia 17 per cent in a day – shows how skittish investors might again be, if their dream of an undisturbed 45 degree growth path is interrupted.
For now, and even despite Microsoft’s massive earnings beat, earnings season is less about profits and more about vision. If AI delivers transformative returns, shareholders could see massive payouts down the line. But if it’s a winner-take-all race to superintelligence, some may overpay for talent and tech. Investors should focus on companies balancing bold bets with disciplined execution – Microsoft and Alphabet stand out, but Meta’s aggressive spending is worth watching closely.
Disclaimer:
The Polen Capital Global Growth Fund owns shares in Amazon, Alphabet, and Microsoft. This article was prepared 31 July 2025 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade any of these companies you should seek financial advice.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
He is also author of best-selling investment guide-book for the stock market, Value.able – how to value the best stocks and buy them for less than they are worth.
Roger appears regularly on television and radio, and in the press, including ABC radio and TV, The Australian and Ausbiz. View upcoming media appearances.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
