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

Australia

Small-to-mid-cap

Macro

Asia

Emerging Markets

India

China

 

This document is issued by FIL Responsible Entity (Australia) Limited ABN 33 148 059 009, AFSL No. 409340 (“Fidelity Australia”).  Fidelity Australia is a member of the FIL Limited group of companies commonly known as Fidelity International.

This document is intended for use by advisers and wholesale investors. Retail investors should not rely on any information in this document without first seeking advice from their financial adviser. This document has been prepared without taking into account your objectives, financial situation or needs. You should consider these matters before acting on the information.  You should also consider the relevant Product Disclosure Statements (“PDS”) for any Fidelity Australia product mentioned in this document before making any decision about whether to acquire the product. The PDS can be obtained by contacting Fidelity Australia on 1800 119 270 or by downloading it from our website at www.fidelity.com.au. This document may include general commentary on market activity, sector trends or other broad-based economic or political conditions that should not be taken as investment advice. Information stated herein about specific securities is subject to change. Any reference to specific securities should not be taken as a recommendation to buy, sell or hold these securities. While the information contained in this document has been prepared with reasonable care, no responsibility or liability is accepted for any errors or omissions or misstatements however caused. This document is intended as general information only. The document may not be reproduced or transmitted without prior written permission of Fidelity Australia. The issuer of Fidelity’s managed investment schemes is FIL Responsible Entity (Australia) Limited ABN 33 148 059 009.

© 2019 FIL Responsible Entity (Australia) Limited. Fidelity, Fidelity International and the Fidelity International logo and F symbol are trademarks of FIL Limited.

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