Deglobalisation, digitisation and decarbonisation are three megatrends which will drive performance of global equities in 2022, according to Pendal.
According to Chris Lees, portfolio manager of the Pendal Global Select fund with Nudgem Richyal, these trends had been accelerated by COVID-19.
“These mega, long-term themes are beginning to reassert themselves as the market moves on from COVID-19 bounce recovery plays. It’s now mid-cycle and the market is now really beginning to be driven by these trends,” Lees said.
This was not the first time markets had been characterised by themes, Lees said, with the early 2000s about iron ore and the 2010s about the US technology stocks.
“Bubbles are fun early on. That’s where you make money. The concept is tilting into the new neighbourhood — the new bubble. People who view the stockmarket as mean reversion are mathematically correct, but they’re implementing wrong,” he said.
“A much better way to look at markets is extreme reversion — markets go from one extreme to the other, from fear to greed, from fear to greed.”
The fund also sought to take a equal-weight approach in the portfolio and “ruthlessly” weed out stocks which were unsuccessful.
“What we can do is mitigate our own foibles by doing it this way. We are trying to mitigate the endowment effect — the concept that we as human beings assign more value to something, we possess than what somebody else would pay for it,” Richyal said.
