Economic Outlook

Our baseline scenario

Market Economy 4.0 US Europe Asia Latam
Baseline scenario The flagship strategy was launched in 2017; it is based on a fundamental top-down and bottom-up thematic equity offering. It is a pure-play approach to actual growth themes such as artificial intelligence (AI), Cloud computing, connectivity, robotics and automation, biotechnology, and the "new normal" for consumers. The concept favors companies that manage, develop, and implement knowledge-intensive processes. The allocation is risk optimized with market standard tools, combined with our heat-map identification process. The US exited the shortest recession in July/August and the US economy is now firmly in the early part of a new business cycle. The rebounding labor market has led to solid consumer spending growth, but the lack of idle qualified workers will most likely lead to higher wage growth and lower overall employment growth. Investment will be weak despite accommodative interest rates, as trade uncertainty continues to limit the attractiveness of expensive new investments. Market conditions will be excellent across the main markets, but variations do exist. Pockets of high value opportunities abound in specific segments. Western Europe has not escaped the economic weakness, but evidence highlights that the services, construction, and IT segments remain relatively resilient. EU consumer prices will grow at a slower or stable level in 2020 due to lower energy prices combined with a sluggish economic growth outlook. The region will be affected by major shifts in the global economic environment – the possible outcome is binary. Increasing uncertainty in global economic policymaking and bottlenecks in global supply chains will impact trade, investment, and pricing across the region. Investors should endeavor to understand these factors and how they are driving change, so they can monitor changing trends and stay ahead of major events. Growth will stay muted in Latin America amid global economic headwinds, but pockets of stronger and resilient growth still exist in the region. Demand for LATAM exports, commodity prices, remittances, and tourism growth will all continue to decline well into 2021 as economic fundamentals in LATAM’s key trading partners are weak too.
What drives our opinion Within the portfolio allocation, we identify two performance drivers which are impacted by short-term consumer behaviors and the longer-term capex spending. Typically, in the short-term, we find social media and consumer-spending-related stocks, while in the second segment we have companies that benefit from capex related to secular trends of 5G, the shift from CPU to GPU, AR/AV technologies, and IIOT, amongst others. North America remains one of the best-performing regions due to high income growth and limited exposure to external trade. B2B investment will continue to focus on intellectual property (IP), and industrial and manufacturing output will struggle in the early cycle once inventory restocking is done. Mid-sized early cyclicals are expected to perform in the coming months. The European Recovery Fund helps alleviate concerns about the fragmentation of the Euro area. Evidence highlights that the services, construction, and IT segments remain relatively resilient. A continuous decline in unemployment and a restart of tourism, along with a strong expansionary fiscal stance and accommodative monetary policy, will help the continent regain vigor well into 2021. With all the changes taking place at a global and regional level, it is no longer “business as usual”. Investing in Asia’s rapidly shifting environment must be considered as long-term opportunity – while short-term volatility will remain high (with low average return numbers), we expect that the exposure will be rewarding over time. Latin America’s top opportunities have experienced significant churn over the last few years. Few investments have been steady at delivering consistent outperformance because of their greater resilience to external and internal shocks.
Our favorite stocks AMZN,
CRM,
FSLY,
NET,
NVDA,
V
AMZN,
BAC,
NVDA,
MSFT,
CRM
ABB,
SIE,
NESN,
CFR,
UHR
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Investment product covering this opportunity IRISOS Digital Age Transformation II
ISIN: CH0570343761
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Level of Risk
Opportunity
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DISRUPTION AS OPPORTUNITY