Equities: Navigate the AI and Tariff Disruption—Don’t Fight It

There’s no escaping the market impact of AI disruption and tariff uncertainty. But it’s better to lean into these forces and invest selectively than to be paralyzed by them.

Recent weeks have delivered the all-too-familiar dose of market volatility: a fresh jolt of tariff uncertainty following a U.S. Supreme Court ruling, alongside fears that AI could prove not just disruptive, but economically destabilizing.

The combination has unsettled investors once again—yet neither development should be surprising. Markets have been braced for legal and procedural challenges to tariffs, and AI concerns have been a recurring theme across a number of industry subsectors.

The important point is that neither force is going away. Tariff uncertainty looks set to remain a live issue through the rest of the year at least, shifting with legal authority, political negotiations and implementation mechanics. Meanwhile, the AI disruption story—arguably the most significant creative-destruction cycle investors have ever faced—will likely move faster than prior technology waves, yet it will still take time to work its way through workflows, business models and labor markets.

The danger in moments like this is collapsing everything into a single narrative—“uncertainty is rising”—and responding with blunt de-risking. Investors are better served by accepting that tariff turbulence and AI disruption are inevitable, and that both can produce investment opportunities. The goal is to maintain a process that can absorb narrative change without forcing reactive decisions. While there will certainly be lots of losers in any technology-driven disruption, there will also certainly be lots of winners.

A New Chapter in the Tariff Story

Tariffs remain a policy-driven risk. For now, the administration is aiming to replace the IEEPA tariffs with a 15% global tariff enacted for 150 days. What’s less clear is how this evolves—and what it ultimately means for the fiscal balance, growth and inflation.

On the fiscal side, the ruling could require refunds from the U.S. Treasury and could create refund liabilities for importers. Our best guess is a complex multiyear, administrative/legal process that produces a slow drip of refunds with limited fiscal significance.

For growth, the effects are mixed. We think the effective tariff rate ultimately settles somewhat below the IEEPA regime, which should be modestly pro-growth. Offsetting that, the ruling revives trade-policy uncertainty—smaller than “liberation day,” but still confusing. Overall, we see these forces as broadly offsetting, leaving our 2026 growth and labor outlook largely unchanged.

Inflation likely faces more downward pressure at the margin, though the magnitude is probably small: much of the tariff burden appears already absorbed or passed through, and even if importers receive refunds, meaningful price cuts seem unlikely to us.

Withstanding the AI Disruption

The far more meaningful issue is AI. Disruption is unavoidable, but we are assuming it diffuses unevenly rather than arrives as a single cataclysmic event. Markets, in our view, have been reacting far faster than the real economy can implement change.

The reality is that adopting and integrating new technology tools takes time. Most businesses still face challenges in integrating AI into complex workflows in ways that produce sustainable productivity gains. Even where the incentive is obvious—replacing clunky legacy software systems, for example—ripping them out and rebuilding processes is often measured in quarters or years, not weeks or months. That lag between equity market reaction and operational reality is why AI-related volatility presents risks and opportunities.

As we’ve seen, the market has been like a “heat-seeking missile” moving from one perceived AI “target” to the next: software, private credit, wealth management, consulting and insurance brokerage. Each shift invites the same reflex: sell first, ask questions later, pushing prices beyond what near-term fundamentals seem to justify.

To be clear, reassessment is legitimate. AI can change competitive dynamics in ways that alter the long-dated cash-flow profile of certain businesses. Even if near-term earnings hold up, greater uncertainty around cash flows five or 10 years out can compress multiples or the assumed “terminal value”. The issue is not that investors are asking questions; it’s that markets are indiscriminately selling before any reasonable evidence accumulates on how disruption—and adoption—will actually play out. In practice, that means price moves can reflect fear and positioning more than fundamentals, penalizing whole sectors even though the winners and losers—and the timeline—are still being determined.

The AI “doomsayers” may also be underestimating constraints and second-order effects. If the “doomsday” scenario plays out, policymakers are unlikely to accept rapid growth in unemployment without effecting a regulatory response. Energy and compute availability can also act as practical governors on growth and usage of disruptive AI tools. Importantly, those incumbent companies that aggressively adopt these tools can protect their margins and enhance productivity.

Stay Focused, Disciplined and Selective

Working through these risks means remaining calm when narratives move faster than fundamentals. It means taking advantage of market overreactions by being focused, disciplined and selective: sizing risk carefully, demanding evidence of resilience and adaptability, and leaning on bottom-up work to distinguish temporary market dislocations from genuine long-term impairment.

Please note: This piece was written prior to the military strikes on Iran.