Five investment themes for 2019 and beyond
2019 has been an interesting year so far. Global stock markets started January in the doldrums, only...
Good news football fans: the wait is almost over. The new Premier League campaign kicks off tonight.
While there may be struggles ahead, the opening to the season is filled with nothing but hope and optimism.
Having seen the transfers deadline day come and go (with my own team Chelsea not participating, unfortunately!), fans around the UK will be hoping the recent additions to their teams’ squad could see them exceed their expectations this year and maybe do the impossible.
With this in mind, we thought it would be nice to look on the bright side of Brexit, trust trade wars won’t escalate and be grateful a global growth is slowing – not stopping.
Below are four funds to consider if – as is often the case – the worst never happens:
While we are no closer to knowing if the UK will get a deal with the European Union over Brexit, what we do know is there is a number of unloved and undervalued companies in the UK. Should a deal take place there is hope a number of domestically-focused companies could rally as much as 30%.
Managed by Ben Whitmore, the Jupiter UK Special Situations fund has a distinct value-based approach, with a portfolio 35-45 stocks, the majority of which are mid and large-cap holdings. Ben looks to find out-of-fashion stocks by screening and analysing their 10-year average earnings. Earlier this year, he said the risk/reward of Brexit is much more balanced than it was in 2016 and is, in some cases, favourable. The fund currently has a quarter (25.5%*) held in financial stocks. It has returned 37.4%** in the past five years.
US President Donald Trump has shaken the foundations of global trade, slapping steep tariffs on billions of dollars’ worth of goods from the EU, Canada, Mexico and China. It is with China that Trump is having the biggest issues, as the two global superpowers looks horns. Trump is planning to raise tariff levels from 10% to 25% on hundreds of billions of dollars’ worth of Chinese goods. By digging their heels in, both the United States and China increase the risk of breaking a global economy that is already starting to crack. But, should a sensible deal be reached, things could turn quickly and be a timely boost for both countries.
The First State Greater China Growth fund is managed by Martin Lau and invests in quality companies, with high barriers to entry, pricing power and sustainable growth. The fund – which also has a long-term sustainable mindset – typically holds between 50-60 stocks and has consistently been one of the best performers in its sector, returning 84.9% in the past five years**.
Last month, the acting chief of the International Monetary Fund (IMF) urged central bankers and other policy makers to be ready with more stimulus if the global economy – already slowed by a trade war – continues to falter. The IMF currently believes global growth is set to slow to 3.2% in 2019, rising marginally to 3.5% in 2020, but still well below what many investors may hope for. Central banks like the US Federal Reserve are already introducing policies to tackle this by bringing an end to fiscal tightening and once again cutting interest rates in the hope it may help the global economy break out of this cycle.
If global growth does recover it helps to have a manager who looks at companies of all shapes and sizes. The Rathbone Global Opportunities fund looks for businesses that are differentiated, scalable and have sustainable growth. Fund manager James Thompson has no restraints on geography and sector but does have a slight bias towards mid-sized companies in developed markets. The fund is a concentrated portfolio of 40-60 holdings and has returned 122.3%** in the past five years.
With all the troubles in the world, being optimistic can be hard. But for investors, being able to ignore all the noise – and being patient – can be rewarding.
Schroder Income‘s managers believe that stock markets are inefficient because people make irrational decisions based on emotions and inherent biases. This, in turn, can cause company share prices to deviate from the underlying company fundamentals, which provides an opportunity for investors willing to stand back from the market noise and take a long-term perspective. The fund’s largest sector weightings are currently* to financials, consumer services and basic materials. It has returned 31.3%** over the past five years.
*Source: fund factsheets, 30 June 2019
**Source: FE Analytics, total returns in sterling to 6 August 2019