In the years following the 2008 global financial crisis, stock markets were flooded with liquidity, accompanied by ultra-low interest rates. Investors in financial assets felt that central banks acted as a backstop against economic and market stress, and volatility was subdued and nearly all risk assets rose inexorably.
However, the massive fiscal and monetary response to the 2020 coronavirus pandemic led to a prolonged period of rising inflation, forcing central banks to sharply raise interest rates to try to rein in inflation. Although global inflation has fallen sharply from its 2022 highs, we now live in a very different financial market environment and are unlikely to return to the benign conditions that characterized the 12 years leading up to the pandemic. Central banks’ quantitative easing programs ended and government debt levels soared.
Given these changes, we believe that inflation, interest rates, and economic growth are “normalizing” to pre-2008 levels rather than pre-pandemic levels. In other words, inflation is expected to be higher and more persistent than in the pre-pandemic decade, which could result in interest rates that are structurally higher than in recent history but less restrictive than they are today. Probably not. Moreover, economic growth, first affected by very accommodative monetary policy and then by restrictive monetary policy, may regain some of its cyclicality.
Equity investors must also contend with the threat of disruption from rising geopolitical tensions. In recent years, the United States and China have each imposed restrictions on the other country’s imports and exports of key goods and minerals. Elsewhere, the war in Ukraine and escalating conflict in the Middle East have spiked volatility and disrupted established trading patterns.
Leverage long-term growth trends
In our view, these various aspects of the regime change will have a material impact on equity investors. Nevertheless, we believe that the future holds many opportunities thanks to several key long-term growth trends that will unfold over the next few years.
From 2022 onwards, the topic of AI will never be far from the headlines, generating both great excitement and deep concern. Over the coming decades, AI has the potential to significantly reshape the global economy across multiple sectors, increasing growth and productivity.
Meanwhile, significant investment will be required in the coming years as governments and businesses seek to accelerate the path to decarbonisation, and companies that can provide solutions are poised to benefit. Adapting to a changing climate will also require significant investments in resilient infrastructure, food systems, water, energy, sensing systems, and public health.
A related development is the widespread trend of electrification. Beyond the focus on clean energy, the demand and growth of AI is likely to significantly increase global electricity demand in the coming years, and we are seeing a growing number of hydrogen sources, from nuclear fission to fossil, renewable We are exploring future sources of power generation, such as possible energy sources and batteries. And so on.
Rethinking stock research
Against this complex backdrop, we believe that clients will need a different approach to equity investing, as approaches that have worked in the past may no longer be successful. We believe that success will increasingly require analysis from multiple vantage points to understand the context and the opportunities and risks inherent in individual securities. In this context, Newton has reimagined its research capabilities to give investment team members access to a much wider range of innovative input in idea generation. The work of our multidimensional global research team derives valuable insights from thematic, quantitative, survey, geopolitical, credit, responsible investment, and private market research, as well as in-house fundamental analysis.
Additionally, instead of using typical industry classification criteria to allocate research resources, we have created a basic equity research framework. This approach reorganizes the classification into five distinct groups, known as “pods,” and categorizes companies by characteristics such as maturity, economic sensitivity, and idiosyncratic composition. This approach breaks down barriers between analysts and fosters the sharing of ideas, perspectives, and broader collaboration.
Data is never perfect, but we believe that well-functioning investment teams that think holistically, actively discuss a wide range of research information, and make better-informed decisions. I believe.
Depth of capital strength
To support clients’ specific investment goals, Newton offers a variety of active equity strategies with long-term track records, all of which leverage our broad and robust multidimensional framework. These can work as standalone portfolios or as components that form part of a broader investment solution.
We recognize that each client has their own specific goals, and when seeking to develop opportunities for our clients across the equity world, our starting point is to understand what those goals are. It’s about understanding what your goals are and how, as a professional partner, we can best help you achieve those goals.
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Important information
For corporate customers only. Published by Newton Investment Management North America LLC (“NIMNA” or the “Company”). NIMNA is an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”) and a subsidiary of Bank of New York Mellon Corporation (“BNY Mellon”). The firm was founded in 2021 and is part of a group of affiliated companies that individually and collectively provide investment advisory services under the brand “Newton” or “Newton Investment Management.” Newton currently includes NIMNA, Newton Investment Management Ltd (“NIM”) and Newton Investment Management Japan Limited (“NIMJ”).
In Canada, NIMNA utilizes the International Advisor Exemption (IAE) in Alberta, British Columbia, Manitoba and Ontario, including Ontario’s Foreign Commodities Transaction Advisor Exemption. IAE complies with National Instrument 31-103, Registration Requirements, Exemptions, and Ongoing Registrant Obligations.
The content of this publication is for general information purposes only. The opinions expressed in this document are those of Newton and should not be construed as investment advice or a recommendation to buy or sell any particular security or product. Certain information contained herein is based on external sources believed to be reliable, but its accuracy is not guaranteed. References to particular securities, countries or sectors should not be construed as recommendations to buy or sell investments in those securities, countries or sectors.
This material is provided for general information purposes only and should not be construed as investment advice or recommendations. You should consult your advisor to determine whether a particular investment strategy is appropriate for you. Statements are current only as of the date of publication. Forward-looking statements speak only as of the date on which they are made and are subject to numerous assumptions, risks and uncertainties that change over time. Actual results may differ materially from those anticipated in the forward-looking statements. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. Past performance is not indicative of future performance and does not guarantee that future losses will not occur.
