Neither bull nor bear
Investors should prepare for a ‘wombat market’, or at least that’s what Hyperion Asset Management’s managing director, Timothy Samway, told the Pinnacle Investment Summit when asked if bulls charged or bears awaken.
Samway said the world faced a low-growth, low-inflation and low-interest rate environment with headwinds including ageing populations and high debt.
He said while there would be periods of frenzy and activity, the reality over the next ten years was that investors faced serious headwinds, the first being low sales growth and low earnings, which haven’t achieved their pre-global financial crisis high yet.
“We’ve had ten years of flat earnings,” he said. “The days gone past when you could rely on GDP growth to lift a market into the bull and absolutely invest in anything along the way and make money, I think, is gone.”
Samway said there would be some serious winners and losers in this market and drove home the point that passive investors stood to lose first.
“I know that’s an argument that every boutique in this room would argue,” he said. “The reality is that if you’re just passive investing across markets at the moment, you’re going to be exposed to a whole lot of companies that are right there in the headwinds.”
Samway advised investors to look at companies taking advantage of the tailwinds, and avoid high-risk developing markets, commodities, old media, non-tech customer services and pharmaceuticals.
He said investors should be wary of downside risk, but stocks like Hermes, Ferrari, Amazon, Costco and Moncler sat in the tailwinds, given the increased hollowing out of the middle class.
Dom Hamson, managing director of Plato Investment Management, added that investing globally could reduce risk and increase returns.
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