How to shield your savings as alert rings on AI bubble

E LIVE in strange times as the global economy slows, yet stock markets in the UK, US and beyond repeatedly hit new record highs, with other assets such as gold, silver and cryptocurrency Bitcoin also soaring.

- By Harvey Jones

Many investors with pensions and Stocks and Shares ISAs will be anxious, as experts warn that markets are in a bubble and that it could all end in a wealth-destroying crash.

Pensioners with retirement pots in drawdown, who rely on dividends and regular withdrawals to top up their state pension, will be particularly concerned.

Some of the bubble chatter is now bordering on the apocalyptic. That's often the case for October, which can be a volatile month. Last week, the Bank of England even made the unusual step of warning of the dangers of a correction, yet markets shrugged this off and kept climbing.

So what is happening, and how should ordinary investors respond?

EXCITEMENT

The rally has largely been driven by excitement over artificial intelligence, with many commentators drawing parallels to the dotcom boom of the late 1990s.

Jason Hollands, managing director at investment fund platform Bestinvest, said AI has fuelled a US stock market bull run since OpenAI unleashed conversational chatbot ChatGPT in November 2022.

"Over the three subsequent years, the S&P500 delivered a return of 62%, while the tech-focused Nasdaq index has surged almost 83%."

However, while big tech stocks such as Apple, Microsoft and Nvidia fly to stratospheric highs, the rest of the US economy is lagging behind.