Matthew Beesley, Head of Global Equities, believes that the impact of technology and an ageing population are likely to be the key themes shaping global equity markets in 2017, while the incoming US President’s planned shift to fiscal stimulus should be supportive for global equities.
What lessons have you learned from 2016?
“Prediction is very difficult, especially about the future”. ~ Niels Bohr.
The political climate in the developed world has changed profoundly. Dissatisfaction with the Davos crowd of multinational business leaders, and central bankers, means that the status quo of financial repression and widening inequality has been rejected.
What are the key themes likely to shape the markets in which you invest in 2017?
The forces of capitalism, politics and regulation will continue to produce conditions that are ripe for an investment philosophy based on change in 2017. There are a number of themes that we believe will continue to impact the global investment universe as we look forward. The impact of technology on our lives, be it through the shift towards automated and electric vehicles or the growth of networks and systems that harness artificial intelligence, will continue to shape a wide range of business models. The issue of balancing the need to meet the healthcare requirements of an ageing population while maintaining cost-efficient solutions is likely to mean that only those healthcare companies that can offer true economically-adjusted health benefits will prosper. The gap between those companies that have truly innovative products and those that are relying on ‘me too innovation’ and incrementalism is likely to widen in terms of long-term investment performance.
What should investors expect from your asset class and your portfolios going forward?
In nominal terms (without adjusting for inflation) the MSCI World Index is still below the peak in 2015. Noting the recovery in the global economy and the shift to fiscal stimulus (increased spending and tax reductions) in the US with the arrival of the new Trump administration, we believe that conditions exist for the global equities index to climb above its 2015 high and provide a favorable environment for investors. Uncertainty around Britain’s exit of the European Union may mean that sterling continues to weaken and provide a further tailwind for sterling denominated returns in the early part of 2017, but we are conscious that the majority of the weakness in the currency since Brexit may have been achieved.