60 seconds with Alex Tedder on the 2016 outlook for global equities
While the macroeconomic outlook looks uncertain for global equities, Alex Tedder finds reasons to be bullish over individual companies, particularly those that specialise in disruptive technology and provide earnings power.
1 December 2015
Looking at the big picture perspective we're actually quite cautious. There are a number of reasons for this:
- Growth globally is lacklustre in all key regions, even the US, and now China is slowing quite rapidly.
- Interest rates are low but they are expected to rise.
- Equity valuations are high, relative to history, and looking ahead there is clearly scope for derating.
Looking at individual companies, however, the picture looks much better.
Below are three areas we are particularly focused on where there is scope for earnings surprise.
We see a lot of opportunity in disruptive technology.
There are new companies with new business models that are shaking up legacy businesses. They are creating very strong revenue and earnings growth, which we think will accelerate over the next 12 -months.
Innovation and pricing power
We are big believers in innovation. Companies which innovate well generate strong revenue and earnings growth for their shareholders.
Many legacy companies struggle to generate much top line growth, but the good ones are cutting costs, focusing on the balance sheet and delivering earnings growth to shareholders through the careful management of the assets they have.
- Alex Tedder
Important Information: The views and opinions contained herein are those of Schroders’ Investment team, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change. UK: Schroder Investment Management Limited, 31 Gresham Street, London, EC2V 7QA, is authorised and regulated by the Financial Conduct Authority. For your security, communications may be taped or monitored. Further information about Schroders can be found at www.schroders.com US: Schroder Investment Management North America Inc. is an indirect wholly owned subsidiary of Schroders plc, a SEC registered investment adviser and is registered in Canada in the capacity of Portfolio Manager with the Securities Commission in Alberta, British Columbia, Manitoba, Nova Scotia, Ontario, Quebec and Saskatchewan providing asset management products and services to clients in Canada. 875 Third Avenue, New York, NY, 10022, (212) 641-3800. www.schroders.com/us