7IM comments on the new opportunities for investors in the 'roaring' Twenties
Seven Investment Management (7IM) with an outlook for investments in 2020 from Terence Moll, Head of Investment Strategy at Seven Investment Management, writes that the new decade has a touch of the roaring Twenties about it.
Moll believes that emerging market bonds, healthcare and inflation will offer investors fresh opportunities over the next decade.
Moll says: “Every decade deserves a name. Some of us remember the Swinging Sixties, the Nineties ushered in political change across the world, and the Noughties sounded deliciously saucy (although it ended with the global financial crisis).
“But the decade just ending has been a no-name era. The ‘Teens’ label was taken, and ‘Tweenies’ never caught on, so the world spent 10 whole years with no identity, just a grey association with slow growth, populism and melting glaciers.
“While investors face similar challenges in 2020 as they did in 2019, there are ample opportunities out there for those willing to look for them.”
Moll identifies the main sources of global growth, in terms of both people and economics, as emerging markets.
Moll says: “One of their advantages is that they can gain from a less developed starting point, by borrowing advanced technology from abroad and leapfrogging costly stages of economic development.
“Visit a new Asian airport and the experience will be better than in Paris, Chicago or Rome. We think these economies are in good shape, with steady growth and low inflation, and hold a large overweight to emerging market bonds.”
In terms of healthcare, Moll comments that the whole world is steadily getting older, particularly in major economies such as Japan. As people age, they spend more on healthcare – to give themselves more healthy years of life.
Moll says: “Healthcare companies have suffered over recent years due to US politics and to underinvesting in research.
“But they’re now spending more on technology and on developing treatments focused on individuals and their needs.”
“We have a core position in US healthcare stocks that should perform well in the long run.”
Finally, looking at inflation over the next decade, Moll believes that while central bankers don’t anticipate much in the way of higher inflation in the near future, there is tolerance for some increases and this creates opportunities for investors.
Moll says: “Across the world, inflation has been low for many years. We don’t see an inflation shock anytime soon, but also believe that fears of deflation are overdone.
“Central bankers are saying that they will tolerate inflation above their targets for a while, to balance out the lows of the past few years.
“We believe them, but the market doesn’t! We have a long US inflation position in portfolios that will gain if inflation rises in 2020.”