Up Close with Global Equity Portfolio Manager Jody Jonsson | Capital Group

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Up Close with Global Equity Portfolio Manager Jody Jonsson

What is the outlook for the global economy, particularly overseas, where stock prices have jumped this year?

Global growth is generally encouraging. The U.S. expanded about 2% last year. That’s not barn-burning, but it’s a continuing recovery that is one of the longest on record. We’re near an all-time low in unemployment, and corporate profits are growing reasonably well.

The biggest change in the last few months is that the European elections went better than expected. There was fear about the French presidential election and whether populism would engulf Europe. Capital Group analysts did independent polling and research before the vote, which indicated that the moderate candidate, Emmanuel Macron, would prevail. When he did, investors turned back to economic issues. The market had been pricing for the worst case, so a lot of European stocks were fairly cheap relative to their U.S. counterparts before the election. 

Does Europe appear to be turning a corner economically given that recent data have been positive?

We’re starting to see more sustained growth. Many indicators are ticking upward, such as consumer confidence. One of the messages of the French election was that there’s an appetite for economic reform and probably a window of opportunity for making reforms in the French economy. Economies like Spain that restructured several years ago are seeing a payoff from that now.

The important thing for us is not so much predicting the growth of any one country but finding good global companies. There are terrific companies based in Europe that have diversified sales around the world and aren’t reliant on individual European economies. Most of them are benefiting from global growth much more than from Europe-centric growth.

One of the strongest areas of the U.S. market over the past year has been technology. What are your thoughts on this sector, and is there a risk that share prices have gotten ahead of themselves?

Many large tech companies have tremendous growth, ingenuity and innovation. These companies have significant strengths, and there is a lot of reason for optimism in the long run. It’s also important to point out that the recent rally is very different from the dot-com boom in 1999 and 2000, when you had insanely valued companies, a great number of which weren’t making money. The companies we’re talking about today are enormously profitable.

Having said that, the market capitalizations of some of these companies have grown dramatically. There is a possibility that in the short term the law of large numbers could begin to catch up with them. It would not be unusual at all for an industry that has rallied strongly to go through a period in which it catches its breath.

What other industries are you finding value in?

One area is medical equipment — companies that make lab equipment or devices for testing air and water. There is great demand for those sorts of products in a country like China, which has issues with air and water pollution, and is likely to boost spending in these areas regardless of economic conditions.

There are also opportunities in the financial sector in Asia. Rather than considering Chinese financials, I prefer Western companies that have operated in Asia broadly for many years. Their growth is promising, and I have confidence in their managements and accounting standards.

Another compelling area is financial technology, or fintech, which stands to benefit as financial institutions ramp up spending on information technology. Banks have gone through a series of mergers in the past decade and now must spend significantly to make sure their back-office systems are compatible. 

I try to focus on investments where Capital Group has an analytical edge — a company we know very well that has a tailwind and a reasonable valuation. Perhaps the company is getting overlooked because investors are more focused on other areas. Those kinds of companies are my sweet spot.


Jody Jonsson is a Capital Group global equity portfolio manager in the Capital World Investors division, based in Los Angeles. In this interview, she discusses the outlook for global stocks and reveals some of the areas where she continues to find value in a rising market.

The above article originally appeared in the Summer 2017 issue of Quarterly Insights magazine.