The ‘Halo’ Trade: Why Old Economy Stocks Are Shining in the Age of AI
As artificial intelligence continues its rapid ascent, reshaping the global economy, a surprising trend is taking hold in financial markets. Investors are flocking to companies with substantial physical assets and enduring relevance – a strategy dubbed the “Halo trade.” This shift is driving record highs in UK and EU stock markets, while simultaneously creating headwinds for US tech giants.
What is the Halo Trade?
The term “Halo” stands for “heavy assets, low obsolescence.” It describes an investment approach focused on companies possessing tangible, productive assets that are less susceptible to disruption by AI. Think energy grids, pipelines, utilities, and transport infrastructure. These businesses often have high barriers to replication due to cost, regulation, time to build, or engineering complexity.
This isn’t simply a nostalgic return to traditional industries. It’s a calculated move based on the understanding that while AI will undoubtedly transform many sectors, some assets will remain fundamentally key regardless of technological advancements. As Saxo’s Ruben Dalfovo puts it, these are the “you still need this on Monday morning” businesses – essential services like waste collection, water, and regulated power networks.
AI Concerns Fuel the Shift
The rise of the Halo trade is partly a reaction to growing anxieties surrounding the sustainability of valuations in the AI sector. A recent report from Citrini Research, outlining a potentially disruptive future driven by autonomous AI systems, rattled US markets and contributed to a sell-off in software and data-focused companies. Investors are reassessing risk and seeking stability in a world increasingly dominated by unpredictable technological change.
Performance Data: Heavy Assets Outperforming
The numbers speak for themselves. Goldman Sachs reported that its basket of over 100 large-spending, asset-intensive companies has outperformed a similar grouping of capital-light firms by 35% since 2025. This demonstrates a clear shift in investor preference towards companies with substantial physical capital and long-lived economic relevance.
The FTSE 100, with its concentration of established, “old economy” companies, has been a major beneficiary of this trend. February 2026 marked the index’s strongest month since November 2022, and its eighth consecutive monthly gain. The pan-European Stoxx 600 has also hit record highs, fueled by a rotation out of US technology stocks.
Examples of Halo Companies in Action
Several companies exemplify the Halo trade in practice. Cyprus-based oil tanker shipping company Frontline is currently the best-performing member of the Stoxx 600, with a 57% increase in value since the start of the year. Norway’s Kongsberg Gruppen, a provider of high-tech systems to marine, aerospace, defence, and energy industries, has seen a 46% increase in its share price.
Energy infrastructure companies and oil and gas majors with control over their entire supply chain are also considered prime examples of Halo businesses.
The European Advantage
Goldman Sachs analysts note that European corporates have experienced over a decade of under-investment in physical assets. This creates an opportunity for significant growth as companies begin to shift decisively back towards tangible infrastructure. The narrowing valuation gap between capital-intensive and capital-light businesses in Europe suggests that investors are increasingly recognizing the potential of these assets.
Will the Halo Trade Persist?
While the Halo trade represents a significant shift in investor sentiment, its long-term sustainability remains to be seen. Some analysts believe it’s a temporary rotation driven by portfolio balance and a cooling-off phase after the rapid acceleration of the AI cycle. However, the fundamental appeal of stable, cash-generating assets with low obsolescence suggests that the Halo trade could continue to gain momentum as investors navigate the uncertainties of the AI era.
Frequently Asked Questions
What exactly does “low obsolescence” signify?
It refers to the likelihood that a company’s assets will remain valuable and useful for a long period, even with technological advancements.
Is the Halo trade a rejection of AI?
Not necessarily. It’s more about diversifying portfolios and recognizing that not all sectors will benefit equally from AI. It’s a strategic rebalancing, not a complete abandonment of technology investments.
Which sectors are considered most vulnerable to AI disruption?
Software and data-focused companies, particularly those with revenue models threatened by latest AI services, are currently facing increased pressure.
How can investors participate in the Halo trade?
Investors can consider investing in companies within the energy, utilities, transportation, and infrastructure sectors. Exchange-Traded Funds (ETFs) focused on these areas can also provide diversified exposure.
Pro Tip: Don’t put all your eggs in one basket. Diversification is key, even within the Halo trade. Consider a mix of companies across different sub-sectors to mitigate risk.
Did you know? The term “Halo trade” originated as a niche strategy on specialist trading desks before gaining mainstream attention in early 2026.
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