Insights

The following was published by Livewire, 9th June 2026  |  Author: Chris Conway

Investors have spent much of the past two years obsessing over headline risks - and fair enough, there has been a lot going on. Oil prices, inflation prints, tariff announcements and interest-rate decisions dominate the news cycle, often driving short-term market moves. Yet according to Fulcrum Asset Management's Fawaz Chaudhry, investors may be focusing on the wrong part of the equation.

Rather than concentrating on the initial shock, Chaudhry argues investors should spend more time analysing how those shocks ripple through the economy and financial markets. The biggest opportunities are often found not in the obvious winners, but in the second and third-order consequences.

"The market is still too focused on the spot price of oil and not focused enough on the transmission mechanism."

That framework extends well beyond energy. Whether the issue is artificial intelligence, tariffs, inflation or geopolitics, Chaudhry believes the key is understanding how a disruption affects supply chains, margins, labour markets, capital allocation and ultimately company earnings. 

A higher oil price, for example, does not simply benefit producers and hurt consumers. It can influence everything from LNG markets and fertiliser production to airline profitability, transport costs and central bank decision-making.

In a world where traditional correlations are becoming less reliable and shocks are transmitting faster through markets, that kind of cross-asset thinking is becoming increasingly valuable. In the interview below, Chaudhry explains how Fulcrum is positioning for a more fragmented and volatile investment landscape.

Diversification is no longer about asset classes

One of the biggest changes Chaudhry has observed in recent years is the declining usefulness of traditional asset-class labels when building portfolios.

Historically, investors could rely on bonds to offset equity-market weakness, but inflationary and geopolitical shocks have made those relationships far less predictable. As a result, Fulcrum now focuses less on historical correlations and more on identifying the underlying drivers of risk.

"The key question is no longer 'what was correlated historically?' but 'what becomes correlated under inflation shocks, tariff shocks or liquidity stress?'

That means looking beyond asset classes and assessing exposures to factors such as inflation, rates, liquidity, energy, positioning and crowding. The goal is to ensure portfolios contain genuinely independent sources of return rather than multiple positions that ultimately rely on the same macro outcome.

Why alternatives are becoming more relevant

According to Chaudhry, the traditional 60/40 portfolio was built for an era of structurally falling inflation, predictable policy responses and reliable bond market protection.

Today's environment looks very different. Supply shocks, fiscal spending, geopolitical fragmentation and policy uncertainty have created a backdrop where investors may need additional return streams beyond equities and bonds.

Fulcrum's Diversified Absolute Return strategy is designed to complement traditional portfolios rather than replace them. Within that framework, the Thematic Equities sleeve aims to generate equity alpha while maintaining very low sensitivity to broader equity-market movements.

The objective is simple: improve resilience and consistency without relying on market direction.

Where Fulcrum is finding opportunities

When it comes to portfolio positioning, Chaudhry highlights two themes that sit at the centre of Fulcrum's highest-conviction views: AI disruption and energy scarcity.

The first is not the obvious AI trade.

Rather than focusing solely on the beneficiaries of AI adoption, Fulcrum is increasingly targeting businesses that could be disrupted by it.

"We are increasingly focused on parts of IT services, outsourcing and labour-intensive software models, where AI has the potential to reduce the need for human-driven coding, back-office processing and repetitive knowledge work."

Chaudhry believes many of these businesses are still valued on the assumption that headcount growth and software-seat expansion will remain attractive drivers of earnings growth. In his view, investors are underestimating the extent to which AI could compress both pricing power and labour demand across parts of the services economy.

The second conviction theme is energy scarcity, where Fulcrum continues to favour US oil producers.

"We think the market is still too focused on the immediate oil price response and underappreciates the longer-term implications of the recent energy shock."

Chaudhry argues that spare capacity remains limited, inventories will need replenishing, and geopolitical disruptions have damaged parts of the global energy system. Combined with years of underinvestment in traditional energy infrastructure and rising electricity demand, he believes the backdrop remains supportive for selected energy assets.

AI is becoming more nuanced

While many investors continue to view artificial intelligence through the lens of mega-cap technology stocks, Chaudhry believes the opportunity set is becoming significantly broader.

Fulcrum remains constructive on businesses that provide the physical infrastructure required to support AI adoption, including semiconductors, networking equipment, power infrastructure, cooling systems and electrical equipment.

"Compute demand continues to rise, and the physical infrastructure required to support that demand is enormous."

He also points to the Jevons paradox, whereby greater efficiency can ultimately increase usage rather than reduce it. In practical terms, cheaper AI inference could lead to more applications, more demand for compute power and greater investment in supporting infrastructure.

"The key is to avoid treating AI as one monolithic trade."

According to Chaudhry, the next phase of the AI cycle will be defined by increasing dispersion between winners and losers rather than a simple lift across the entire technology sector.

Three forces will define the next 12 months

Looking ahead, Chaudhry believes investors should stop thinking about markets through a single lens such as inflation, rates or growth.

Instead, he expects the interaction between AI, energy and government policy to be the dominant force shaping markets.

"The most important variable is likely to be the interaction between AI, energy and policy."

AI is driving a major capital expenditure cycle. Energy markets remain constrained by years of underinvestment and geopolitical tensions. At the same time, fiscal deficits, tariffs and policy uncertainty continue to influence markets around the world.

The result, Chaudhry argues, is likely to be a market characterised by greater dispersion, higher volatility and a growing opportunity set for investors capable of identifying both winners and losers as these forces collide.

This is general information only and does not take into account your personal objectives, financial situation or needs. Before acting on the information, consider its appropriateness to your circumstances and read the Product Disclosure Statement (PDS) and target market determination (TMD) on our website. Fidante Partners Limited ABN 94 002 835 592 AFSL 234668 is the responsible entity and issuer of interests in the Fulcrum Diversified Investments Fund