“If you can deploy a humanoid robot for less than the cost of a human worker, you effectively decouple economic output from population growth. The marginal cost of labour will trend toward the price of renting a robot—which is trending toward zero.” ~ Brett Adcock, Founder of Figure AI

In our Q3 Quarterly Insights, we warned of the Kindleberger Trap: a fracturing global economic order when the global leader turns inward whilst rising powers fail to assume the mantle of stability. We also posit a vital counter-narrative: a structural innovation Supercycle emerging to combat these very pressures.

If the defining problem of the 2020s and beyond is one of demographic decline, the solution is becoming undeniably clear. Are we about to witness the "iPhone moment" for robotics – the arrival of "Embodied AI"?

For decades, industrial robots were expensive, single-purpose, machines locked in safety cages. Today, the convergence of Generative AI (providing the "brain") and massive improvements in electromechanical actuators (the "body") has created general-purpose humanoid robots capable of learning and adapting in real-time.

This is no longer science fiction; it is a near-term capital expenditure decision.

The consensus among forward-looking investment managers is building rapidly. KraneShares, long bullish on this theme, validated the sector in October by launching the first dedicated humanoid robotics ETF (KOID) in London. They are not alone in their optimism.

Morgan Stanley Research estimates the humanoids market is likely to reach $5 trillion by 2050. Goldman Sachs has aggressively updated their outlook, suggesting the payback period for a factory humanoid is nearing just 1–2 years, the critical tipping point for widespread corporate adoption. Meanwhile, ARK Invest forecasts that technological convergence will drive unit costs below $10,000, making them cheaper than human labour for many repetitive physical tasks.

This theme, however, also mirrors the geopolitical bifurcation we frequently discuss. The US is currently winning the "brain" race, led by Tesla’s Optimus and Figure AI (backed by Microsoft and Nvidia), the latter of which is already deploying robots into BMW plants.

However, the "body" race – the ability to manufacture hardware at massive scale is playing out in Asia. As noted by Janus Henderson, China is aggressively cornering the robotics supply chain, mirroring their successful playbook in electric vehicles with players like UBTECH and Unitree scaling rapidly.

Embodied AI is the ultimate deflationary force required to break the back of sticky inflation. It is a multi-decade structural shift that will redefine industrial productivity, enable reshoring, and potentially a new European Innovation Renaissance.

However, sensational growth breeds excess. With China’s own regulators recently warning of a potential "bubble" in low-quality entrants, active selection between the true innovators and the commoditised copycats will be paramount.

To see graphs, download the PDF using the button at the top of this page.

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MARKET REVIEW

Deflationary Boom Assets (Equities, Corporate Bonds, EMD)
November marked a distinct rotation away from the technology-led hegemony of 2025. While the Bloomberg World Equity Index ended flat (-0.01% USD), the internal dynamics were volatile. Value stocks (+2.16% USD) significantly outperformed Growth (-1.07% USD) as investors trimmed exposure to the Magnificent 7 (-1.12% USD) and Nasdaq (-1.45% USD) amidst concerns over AI capex. Regionally, "Old Economy" markets shone: Europe ex-UK (+1.66% USD) and the UK (+1.33% USD) outperformed the US (+0.03% USD). Conversely, China (-2.35% USD) and broader Emerging Markets (-2.27% USD) struggled as weak investment data dampened sentiment. Credit markets remained a quiet haven of stability, with US Corporates returning +0.65% as spreads remained tight.

Deflationary Bust Assets (Government Bonds)
Government bonds acted as a functional hedge in November, driven by softer US economic data which reignited hopes for Federal Reserve easing. The Bloomberg US Treasury Index gained +0.62% as yields on the 10-year yield drifted lower toward 4%. European sovereigns were more muted, with Euro Agg Government bonds flat (-0.04%), while UK Gilts managed a modest gain (+0.13%). The outperformance of US Treasuries relative to peers highlights a flight-to-safety dynamic amidst rising global growth concerns.

Inflationary Boom Assets (Managed Futures, CTAs, Commodities excl. Precious Metals)
This segment witnessed sharp divergence. Copper rallied +3.32%, defying the gloom in China and perhaps signalling early positioning for the industrial automation theme. However, Brent Oil fell -2.87% to $62.87 on fears of a 2026 supply glut. Bitcoin capitulated, crashing -16.68% as risk appetite for speculative tech assets evaporated. Managed Futures struggled to find a unified trend, with the SG CTA Index flat (-0.09%), though trend-followers (SG Trend +0.92%) managed to capture gains from the breakdown in energy and the rally in bonds.

Inflationary Bust Assets (Precious Metals & Inflation-Linked Bonds)
Gold was the undeniable standout of the month. Spot Gold surged +5.91% to over $4,240/oz, completely decoupling from real yields and inflation expectations. While UK Inflation-Linked Bonds fell -0.78%, Gold’s rally suggests the market is pricing in "fiscal dominance" and monetary debasement rather than cyclical CPI inflation. It remains the primary beneficiary of the "Kindleberger Trap" fragmentation we highlighted in Q3.

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To see graphs, download the PDF using the button at the top of this page.

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