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At its latest Market Pulse press breakfast, the bank also highlighted narrowing valuation discounts in Central and Eastern Europe and a renewed focus on fundamentals in Hungary.
Financial markets are being shaped simultaneously by technological innovation, monetary policy shifts and geopolitical risks, creating a challenging environment for investors.
“We are in a period when market developments are being shaped by structural and cyclical factors in parallel. In this rapidly changing environment, expert analysis and diversification are becoming more important in investment decisions. MBH Investment Bank’s goal is to support its clients with sound market knowledge and up-to-date analysis even in this environment,” said Győző Nyitrai, the bank’s deputy CEO for business and general affairs.
The performance of leading U.S. stock indexes may present a distorted picture of the wider market, the analysts said. While the S&P 500 and Nasdaq are trading near record highs, many stocks in sectors not directly linked to AI remain 10%-20% below their annual peaks.
Csaba Debreczeni
“Looking at the indexes, we see a strong market, but beneath the surface the picture is much more nuanced. A significant share of the performance comes from a handful of technology companies linked to artificial intelligence, while most stocks are not benefiting from this rise,” said Csaba Debreczeni, lead equity analyst at MBH Investment Bank.
One of the most important questions for investors over the coming years will be whether the technology sector’s record AI investments generate adequate returns, he said.
Using the returns on capital investment previously expected by investors as a benchmark, the companies concerned would need to generate approximately USD 1.5 tln-2 tln in additional annual revenue to meet current expectations.
The market’s future could depend significantly on whether AI investments fulfill those expectations. Meanwhile, oil prices remain a key influence on inflation, interest rates and, ultimately, equity markets.
Alongside the mixed outlook for equities, bond yields have reached a significant turning point. The U.S. 10-year Treasury yield is again near 5%, while real yields on developed-market bonds have returned to substantially positive territory after years of low returns, according to the bank.
This creates a fundamentally different investment environment from the exceptionally low interest rates of the 2010s.
Péter Vince
“Many investors still think of bonds as low-yielding assets, whereas government bond yields of around 4%-5% are available even in developed markets today. This is a level that, after a long time, once again offers a real alternative alongside equities,” said Péter Vince, head of MBH Investment Bank’s Advisory Desk.
A key question in the near term will be how large budget deficits and energy prices affect inflation and long-term yields.
“An important question is what yield the market demands to finance record levels of government debt. Investors are not primarily concerned about inflation, as evidenced by the substantial real yields priced into the bond market. In this environment, bonds can once again play a significant role in ensuring portfolio stability,” Vince said.
He said investors should view equity and bond opportunities as complementary, with diversification remaining a central element of long-term investment strategies amid international uncertainty.
In Central and Eastern European equity markets, the valuation discount that characterized the region for years appears to be gradually disappearing, the bank’s analysts said.
Corporate earnings remain broadly stable, while recovering consumption, EU funding inflows and high oil prices are supporting regional stock markets. However, these markets remain highly concentrated, leaving bank and oil company performance particularly influential in shaping investor sentiment.
The analysts also highlighted what they described as S&P Global’s increasing treatment of Poland as a developed market, a development that could alter capital flows across the region.
In Hungary, post-election optimism drove a substantial revaluation of domestic assets: the forint strengthened, bond yields declined and stocks rose.
By the second half of the year, however, the initial euphoria had given way to more measured pricing, with investors returning their attention to fundamentals.
MBH Investment Bank expects the Hungarian market’s performance to be shaped primarily by the interest rate path, energy prices and the geopolitical environment.
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