Population growth, aging and urbanization in emerging markets are long-term investing themes (LTIs) that could help investors hedge against the current bear market amid growing global economic uncertainty, according to a report by Swiss wealth manager UBS.
UBS expects all three LTI trends to “last through the next seven to 10-year business cycle” and outperform the broader market, it said in its annual report. Thematic guide.
“With such high economic and political uncertainty and elevated market volatility, we believe now is the time to think about investing for the long term,” UBS said Thursday.
“After the sell-off in growth-oriented stocks this year, many long-term themes are cheaper to capture than this time last year.”
Geopolitical and economic uncertainty is rising around the world, driven by many factors that have significantly slowed growth momentum, the International Monetary Fund reported.
In July, the IMF lowered its growth forecast for the global economy for the second time this year, as Russia’s war in Ukraine continues to fuel inflationary pressures and disrupt recovery momentum from the Covid-19 pandemic.
The IMF now forecasts global growth of 3.2% in 2022 and 2.9% in 2023, following a 6.1% expansion last year.
Global economic uncertainty has also increased volatility in financial markets, which fell into bearish territory earlier this year after a 13-year bull run.
“Major central banks have also started to tighten the reins of monetary policy due to high inflation, which is having a negative impact on the valuation of long-term assets, while concerns about economic growth further aggravate the crisis. investor sentiment,” UBS said.
In May, a quarterly UBS survey found that rising inflation and the Russian-Ukrainian war are top concerns for wealthy investors globally.
In the United Arab Emirates, 33% of investors plan to add to their portfolio if stock markets continue to fall, while another 30% will redirect their investments to different sectors, according to the UBS survey.
As investor sentiment has plummeted, it’s important to focus on strategies in a “changing world” that will help investors identify future market growth, UBS said in the Thematic guide.
“Our themes remain extremely relevant today and allow us to look beyond short-term noise,” he added.
“This year’s sell-off in growth-oriented stocks — which are represented in many long-term themes — has opened up an opportunity to start building positions,” UBS said.
The aging LTI theme covers sectors such as robotics, automation, healthcare, medical devices and health technologies, while population growth provides opportunities for investment in energy efficiency, l agriculture and education, including distance learning, report says.
Meanwhile, urbanization in emerging markets will be driven by changing living standards and a shift in the balance between agriculture and manufacturing, UBS said.
“This displacement of the population radically changes the demand for housing and food processing; changes water use patterns; changes transport and communication links; and has implications for health care, education and public infrastructure,” he said.
However, the disruptor of all three LTI themes will be technology and the changes it will bring to society, UBS added.
“Technological change, as disruptive change, is difficult to predict with certainty. What is important is that long-term investments have the flexibility to adapt to the consequences of technological change.
Updated: September 10, 2022, 04:50