Demographics and uncertain times


1. What is your investment outlook for Global Equities in 2020?

Global Equities have recovered strongly in 2019 after a period of weakness in 2018. This has been driven by increasingly accommodative monetary policy by the Fed and other Central Banks around the world as the global economy has slowed. Against such a backdrop of lower for longer interest rates we continue to view Equities as an attractive asset class. Uncertainty will continue - particularly with the US presidential elections in November 2020. However, by adopting a bottom-up investment approach focused on owning good quality businesses driven by longer term, structural megatrends such as Demographics we are confident in our ability to weather any short-term volatility.


2. What do you think could surprise investors positively (negatively) next year?

We believe that our ability to predict macro events is negligible. Consequently, our focus is on owning good businesses which can grow and compound over the long term. We believe that regardless of the macro environment the 3 key themes which we invest behind in our fund - the ageing of the population, growth of the middle class and population growth - will persist. We are, therefore, focused on owning businesses which are leveraging to these themes regardless of any surprising macro-economic news.


3. Within your portfolio, what areas are you avoiding?

Given our focus on owning companies driven by demographics as well as our quality overlay we have very little exposure to energy, commodities and financials. During periods of ‘reflation’ or style rotations towards value this hurts the fund’s relative performance. However, over the long-term, we believe that limiting our exposure to these sectors and investing in better businesses will create more value for investors and our clients.


4. Within your portfolio, what are your highest conviction ideas for 2020? 

We continue to look for opportunities that fit the strategy and have used market corrections to increase allocation to conviction holdings. It is important to focus on the long term, looking beyond short-term sentiment dips and viewing volatility as an opportunity to invest in businesses that offer robust growth prospects and are run by proven management teams. At a time of macroeconomic and political uncertainty, demographics – the study of a population based on factors like age, income levels, employment, and education – standout in terms of their predictability. Notably, it is the long-term earnings power of companies that are the ultimate drivers of their performance – as opposed to changes in valuation multiples, which tend to drive short-term valuation. The portfolio is positioned to benefit from slow-moving, long in duration and highly predictable demographics trends. The fund invests across three main demographic factors – ageing population, growth of the middle class, and population growth. Within these three are sub-themes like increased travel and financial penetration (subthemes of growth of the middle class). We believe that over time the emphasis on holding quality names with sound underlying growth prospects has the potential to deliver superior returns.


View Fidelity's other 2020 outlooks





Emerging Markets




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