If we look back at equities over recent history, markets have tended to move in decadal mega cycles, where one major ‘theme’ has dominated returns.
Being on the right side of these trends has proven extremely beneficial for investors. Over the past decade, one of the most pronounced trends has been the dominance of a select group of US-based, mega-cap technology companies. Supported by an environment of low interest rates, these companies have driven a substantial share of equity market returns, resulting in increasingly concentrated market leadership. However, that has begun to change as a new era of higher inflation and interest rates, and rising geopolitical tension, is marking the beginning of a prolonged shift, the scale of which we typically only see every 10 to 15 years.
What is particularly unique, and exciting for investors, about this current juncture is that there appears to be a confluence of transformational and multi-generational shifts occurring simultaneously. In this paper, we will discuss four key areas and examine how we are identifying the long-term investment opportunities that they present.
Looking forward, we expect these powerful forces to drive far broader market leadership and a much richer, more diverse set of investment opportunities over the next decade and beyond. That does not mean certain technology-focused stocks cannot continue to do well but they may be joined by companies in other sectors and regions, and exposed to different structural tailwinds.
In other words, we believe it could be a particularly fruitful period for bottom-up, diversified and global stock pickers. Against such a backdrop, it is important to find investment strategies that can flexibly navigate significant market shifts while keeping true to their objectives and philosophy.
