Topic 3: TOP 5 GLOBAL THEME

In the next three months, we believe the answers to the following questions will determine the direction of global markets and which themes will outperform:

  • How will the upcoming earnings season play out?
  • Will the world, especially the US, avoid a recession?
  • Does the Ukraine war look like a “win” for the West, for “Russia” or some other outcome such as a tentative ceasefire or continued uncertainty?
  • Do inflation numbers start to improve?
  • Is China able to control Covid outbreaks, resume full productive capacity and ease supply bottlenecks?
There are five themes that we recommend going overweight on for the next three months:

1. Global Inflation Winner

We have three sub-themes to play Global Inflation

  • Commodity Producers: The huge rise in energy prices will also boost investment in alternatives such as solar/wind/hydrogen/nuclea
  • Rising Interest Rates: Companies with major earnings in the distant future are discounted further (such as smallcap high growth), conversely, companies generating large cash flows and earnings now, are preferred
  • Food Inflation and supply: Inflation, as well as the Ukraine war, is spiking food prices across the glob

2. Ukraine War Relative Winners:

We have two subthemes to play Ukraine War relative winners:

  • Defence: The Ukraine conflict is causing a huge spike in defence spending around the world and arms manufacturers will be the winners
  • Country Winners: While US consumers are getting hurt from rising commodity and energy prices (like all consumers around the world), their stock market contains many companies that benefit from it. The US is either self-sufficient or a net exporter of energy and most commodities. Furthermore, it has little exposure by way of trade with either Russia or Ukraine
  • Food Inflation and supply: Inflation, as well as the Ukraine war, is spiking food prices across the globe

3. Tech Winners:

We have 3 subthemes to play Tech Winners:
  • Defence: The Ukraine conflict is causing a huge spike in defence spending around the world and arms manufacturers will be the winners
  • Cybersecurity: Cyber-attacks on enemy infrastructure are a big part of modern warfare and countries are strengthening their defences against such attacks. Cybersecurity software developers will be the winners
  • Mega Cap Growth: Mega Cap Growth stocks with high percentage holdings in tech giants such as Apple/Google/Amazon and Microsoft, with their dominant positions and established supply chains are expected to weather the current market uncertainties the best

4 Infrastructure Spending:
Countries across the world are investing in their infrastructure to stay competitive. Global warming trends suggest that this spending may accelerate

5 Recession Risk Winners:
In a recessionary or a slow-growth environment, consumer staples and healthcare perform the best



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