Equities

European equities have lagged the US for more than a decade. But there are reasons to believe that Europe can outperform again: The benchmark is now more exposed to higher growth companies, valuations are attractive, macro reforms have mitigated risks and Europe is leading the way in ESG.

High-growth, high-momentum stocks were among the best performers of 2020, then value stocks rallied into the first quarter of this year. We are cautious of valuations, as some stocks have already priced in a recovery. Investing in quality companies with predictable earnings power at reasonable valuations can help investors prepare for a rainy day.

Strong momentum across many markets has increased investors’ concerns about inflated valuations. As the “growth-at-any-price” trade seems to be fading, many believe a rotation out of growth stocks and into value may continue to outperform the broader market. Before you rearrange your portfolio in light of the current rotation, here are a few things to consider.

Chinese equities can offer an exciting and dynamic opportunity, but investors must navigate a complex regulatory environment and quickly changing competitive dynamics. Our research team sheds light on the outlook for e-commerce giant Alibaba, how to approach the A-shares universe and pressing issues investors face in China today.

Even as the broader geopolitical environment and global economic uncertainty continue to impact the headlines on China, strong growth prospects underpin several sectors and companies.

While the US is home to many global leading companies, it is not the be-all and end-all for investors. Actively allocating to international equities can bring the benefits of diversification. We believe a portfolio that combines the best of domestic and international quality growth equities is the right choice for long-term investors today.

Airbnb’s stock soared after its IPO, but it is not yet profitable and faces many competitive threats. Meanwhile, its rival Booking Holdings is an established leader with a proven business model and a more earth-bound valuation. We think Booking is a true quality company with a solid track record, not a speculative bet.

While higher interest and inflation rates may more predominantly impact owners of long-duration assets in a variety of ways, they are also simply a positive signal of strong economic growth, which is a good thing. They also should enable for a more generally healthy pricing environment for risk assets. Higher interest rates are not necessarily something terrible to be only feared.

With US President Biden’s $1.9 trillion Covid relief package, alongside the recently proposed $2.25 trillion in infrastructure projects, there is growing concern about the impact these programs could have on inflation and interest rates globally. In the investment world, we have been operating amid declining rates and low inflation for so long that few may realize the impact rising rates would have on investment returns.

Stop fraud bleeding returns. Fraud from related party transactions, kickbacks and fiddling the books can run for years. The steps to minimize risk are based on 3 governance structures – independence from management is key. Amazing how often they are not in place, especially in some markets.

All-star New York Yankees pitcher Lefty Gomez once said: "I'd rather be lucky than good.” Successful investing over time is, however, not a game of luck. It requires discipline, skill and a focus on quality. Investors can prepare for a downturn by focusing on quality businesses with predictable earnings growth.

What makes the internet high-speed, a phone smart and many other consumer products safer and more efficient? Semiconductor chips. They are at the heart of emerging technologies. We believe the industry has entered a new phase of growth that is characterized by higher profitability and lower earnings volatility.