In a rapidly evolving world, when it comes to investment and tax planning it is vital to understand and take account of the global factors which impact world markets. Julian Broom, our Chief Investment Officer, shares his thoughts following our 2020 Investment Series, held in a number of locations around the world during January and February.
Our recent Investment Series offered an analysis of just what to be aware of when considering your investment portfolio for this year and beyond. It’s clear that there is a significant amount of uncertainty currently facing the world, and a number of recent events, not least the long-term implications of the Coronavirus, could have an impact. Despite this, the financial system is working well, and there are no obvious signs of it being undermined in the immediate future.
Looking back on 2019 showed that almost every major asset class gave a positive return, despite global growth forecasts being consistently cut. The core themes for investment markets remained unchanged – high government and personal debt, inequality and (perhaps most notably) growing global concerns over climate change, which were brought to the world stage by the actions of Greta Thunberg, and the devastating fires in Australia and California.
A world in transition
This all leaves us looking at a world in transition; baby boomers handing over the baton to millennials, pension and healthcare costs becoming a real and present problem and the waning dominance of the United States, despite Mr Trump’s vocalism to the contrary. Against this backdrop is the reality of slower global growth and the fact that environmental, social and governance are of growing importance to investors.
The dawn of a new decade also gives us the opportunity to look ahead. It’s clear that the next few years will see a fundamental shift in consumer attitude which is very different to the last 10 or 20 years. The average person will be Generation Z, born in the mid-1990s and comfortable with digital technology. As this generation grows in influence, we’ll likely see a shift to the left, in terms of political attitude, and a rise in the popularity of green and ethical brands.
Forming an investment strategy
When it comes to translating these trends into an investment strategy it’s clear that for equity investors the concept of Socially Responsible Investing (SRI) will become critically important. Today 25% of all managed assets are influenced by SRI and research shows it even enhances returns. In the future some companies (those in oil, coal and luxury goods) may even face the prospect of lower returns as their practices are called out and shunned by investors.
So where does that leave us? Equity markets, notably healthcare, technology and real estate, are likely to remain attractive in the coming months and certain commodities and some bonds may be worth considering too. In summary, it’s clear that we are seeing very real changes in consumer sentiment and the global outlook. Taking account of this and ensuring that you have a robust investment strategy will be more important than ever.