At the start of this year, after a bruising 4Q18, we stood out to say this was not a start of a bear market. Rather, we said it was a “tug of war” between the bulls and the bears – and that this would result in a wide-ranging, volatile market. The markets then rallied hard in 1Q, and at the start of 2Q we argued that unless we saw a comprehensive trade deal, we would not see new highs. This roadmap has played out as said.
Where do we go from here?
While we continue to see this as a “tug of war” market, there are game-changing trends to capitalise on. This quarter, we title our publication “A Changing World”.
Today, we see old business models unravelling and new secular themes emerging. For example, negative interest rates, the pervasiveness of e-Commerce, the ongoing trade war, and the Sustainability agenda will have profound implications on investing. As a result of these changes, a large chunk of the world’s equity capitalisation is under siege. We first saw e-Commerce disrupting retail. Now these new technologies are disrupting the media, telecom, auto, and financial sectors.
For sure, risks abound from these changes, but there are also exciting opportunities. Should we cringe and hold cash? With near-zero rates, this surely is not going to work.
Our call is to engage markets through long-term, multi-asset, and globally-oriented portfolios. The underlying strategy is to “barbell”: This entails stripping away sectors that are under siege from disruption and buying into companies plugged into secular growth themes, alongside holding income-generating assets.
In this issue, we detail exciting trends in cloud computing, automation, the New Defensives, and the Sustainability agenda.
Do enjoy the read!
Hou Wey Fook, CFA
Chief Investment Officer
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