Investors are increasingly gravitating towards a newly coined investment theme known as the HALO trade, which has emerged as a response to growing concerns surrounding artificial intelligence disruptions and geopolitical uncertainties, particularly the recent volatility stemming from the conflict in Iran. The term “HALO,” which stands for heavy assets and low obsolescence, identifies sectors and companies that rely on substantial physical capital and remain economically relevant despite technological advancements.
Initially popularized in February by Josh Brown, CEO of Ritholtz Wealth Management, the HALO trade gained traction as technology stocks experienced a downturn due to fears surrounding AI-driven market shifts. In a note dated February 8, Brown articulated the concept, stating, “I’m using the backronym H.A.L.O. to describe the types of stocks that I expect to serve as a winning haven from this year’s feverish pitch of disruption fear.” He emphasized that these companies are insulated from AI challenges, adding, “There’s nothing Sundar Pichai and Sam Altman can take from them.”
Goldman Sachs underscored the significance of the HALO trade in a report released on Monday, emphasizing its relevance amidst current market dynamics. According to the firm, HALO stocks exhibit two primary characteristics: a business model that is highly reliant on physical capital and barriers to replication, and an enduring economic significance. This can involve complex regulatory challenges, substantial financial investment, or an established infrastructure network. Notable sectors fitting this mold include energy, utilities, and transport infrastructure.
Goldman also highlighted the importance of asset intensity in driving valuations and returns for HALO stocks. The investment firm pointed to a noticeable year-to-date outperformance in energy, materials, and consumer staples, suggesting that these sectors are gaining favor among investors. Companies like Exxon Mobil, which Brown categorized under the HALO umbrella, alongside Walmart and McDonald’s, exemplify the versatility of this investment theme.
When evaluating whether a company qualifies as a HALO stock, Brown recommends a straightforward question: “Will chatbots and LLMs lessen or eliminate the need for (blank) in the near future?” Stocks that are resilient to AI disruption possess a competitive edge in the current market climate.
Goldman’s prognosis for the HALO trade underscores favorable macroeconomic conditions that are propelling these stocks upwards. The firm noted that factors such as rising real yields, geopolitical fragmentation, and shifts in supply chains have reoriented investment focus toward tangible assets. With markets rewarding infrastructure, networks, and engineering complexity, HALO stocks have become increasingly appealing amid the backdrop of AI anxiety reshaping investor sentiment around technology.
Furthermore, the ongoing conflict in Iran is anticipated to spur government spending and reignite inflation, which could have implications for market dynamics. With an emphasis on a manufacturing revival and onshoring supply chains, the HALO trade is increasingly positioned as a strategic hedge against the uncertainties posed by the rapidly evolving landscape of artificial intelligence and global geopolitical tensions.
