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Leaning into uncertainty – Time to reconsider equity markets?
Andy Budden
Investment Director
Katharine Dryer
Head of Equity Business Development

Economic uncertainty and higher yields on cash and other low-risk assets have driven investors to reduce equity exposures within their portfolios. 


One-year cumulative global fund flows


cumulative-chart

Data as of 31 July 2023 in USD terms. Asset flows for Worldwide Open-End, Money Market, and ETF Funds excluding Fund of Funds and Feeder Funds. Source: Morningstar.

We remain in an uncertain macroeconomic environment but there are reasons to believe that we are close to a turning point in rates that will pivot the opportunity more towards equities.


Timing turning points is notoriously challenging, however, and how you rebuild exposure can be as important as when. This involves a more detailed understanding of equity market dynamics and sector level opportunities.


Following the narrowness of equity market returns year-to-date and an uncertain future, an active approach based on fundamental research can offer quality and resilience.


Since the start of the year to end August, global equities have risen 14.8% compared to 3.6% for cash and 1.7% for short-term bonds. However, it has been well documented that most of these gains have come from the so-called "Magnificent 7" companies, with Tesla, Apple, NVIDIA, Microsoft, Amazon, Meta, and Alphabet, contributing more than 50% of the total return alone. Looking beneath the surface, we find that most of the gains for these companies have come from re-rating rather than earnings per share (EPS) growth.


While the growth prospects for these seven may remain strong in future, we believe there are still many opportunities for companies with attractive fundamentals in other areas.



Andy Budden is an Investment Director at Capital Group. He has 30 years of investment industry experience and has been with Capital Group for 19 years. Earlier in his career at Capital, he was an investment specialist. Prior to joining Capital, he worked at Watson Wyatt Investment Consulting. He holds both a master’s degree and a bachelor’s degree in engineering from the University of Cambridge. He is an associate member of the Institute of Actuaries. Andy is based in Singapore.

Katharine Dryer is Head of Equity Business Development for the Europe and Asia Client Group. She has 25 years of investment industry experience and has been with Capital Group for 1 year. Prior to joining Capital, she has worked at Jupiter Asset Management as deputy chief investment officer, and at BlackRock as a Client Strategist. She holds a master’s degree in modern and medieval languages from the University of Oxford, and an MBA from Cass Business School. Katharine is based in London.


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