Ian Warmerdam, Head of the Edinburgh-based Global Equities Team, believes that in 2019 and beyond investors should focus on companies with fundamental resilience and that are operating in end markets with long-term secular growth.
What lesson have you learned from 2018?
We said it in 2017, and we say it again in 2018. This has been another year when we were reminded just how challenging it can be to predict macroeconomic and political events or prevailing market sentiment. Whether it is the unfolding trade disputes across the globe, the continued uncertainty of Brexit, or unpredictable election outcomes and political rhetoric, predicting these changes and the impact they would have on financial markets was as tough as ever.
What are the key themes likely to shape the markets in which you invest in 2019?
We continue to focus our analysis on high-quality and resilient companies from around the world that are well placed to benefit from what we believe are the more predictable societal and demographic trends shaping markets.
These trends are often underappreciated by the equity market. They include the transformational effect of the internet; the need for greater healthcare innovation given the ageing global demographic; the ongoing shift from cash usage towards paperless payments; the drive for greater energy efficiency across a wide range of industries; and the growth of the emerging market consumer.
Where do you currently see the risks within your asset class and where are the most compelling opportunities?
The risk most relevant to investors for any asset class is the permanent loss of capital. We seek to mitigate this by gaining a deep understanding of the resilience of a company’s business model, to invest with a strict valuation discipline and to maintain a well-diversified portfolio.
In our view, investors who try to predict geopolitical and economic news flow and the short-term impact this could have on markets are creating unnecessary risks. Our approach is to invest with a long-term mindset, basing our decisions on a five-year time horizon.
We continue to invest in companies that have high-quality characteristics in terms of their franchise, financials and their management. We believe that this will provide resilience during periods of market uncertainty, allowing us to invest for the long term as these secular trends take hold.
We also aim to avoid environmental, social and governance risks and actively engage with companies facing potential threats. Many of the companies we analyse and invest in are beneficiaries of the previously mentioned long-term sustainable trends. We choose to focus on these rather than the much less predictable factors that can influence markets.
Which themes have the potential to redirect markets in 2019? Download our one-pager summary to find out
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