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This article is from our latest edition of MarketWatch.
28th January, 2019
At Davy we continuously analyse markets to identify the best investment opportunities for our clients. Our team of analysts, economists and strategists pinpoint trends in the sectors they think will do well next year and potentially be good long-term investments.
Thematic investing hasn’t gone away. Over the years they may have progressed or changed somewhat from one theme to another, but as the market becomes increasingly globalised some topics appear across the board. In my recent move from Japanese to Irish equities, I was surprised by the commonality of a few themes on both sides of the world such as rising costs, labour shortages, increased automation, investment in systems for the future and long-term growth outside the domestic market. Many of these common issues can be directly related back to demographic trends.
So what are some interesting themes to look out for in 2019? Well, global demographics speak for themselves. Most countries have a rapidly ageing population, and with an ageing population comes demand for several things such as: improved healthcare; better medication that targets more specific illnesses; increased factory automation and alternative solutions such as attracting women back to work as labour shortages kick in; and improved labour mobility as different opportunities arise for those still working. Ageing populations also increase the need for more robotics for the heavy lifting in hospitals/care homes; they also cause succession issues for family owned businesses and lead to a boom in certain consumer areas as the ‘active elderly’ spend their hard-earned cash.
One open call that we currently have at Davy is a sub-sector of the ageing theme; healthcare – and the growing demand for it as populations age. Healthcare of course also has a number of other driving factors – not just demographics, but also innovation in the industry, and globalisation as rising standards of living lead to increased healthcare spending globally. Other secular trends benefiting healthcare spend include increasing obesity.
Our call on healthcare outperformed in 2018, and this segment is now more fully valued than last year. However, going forward we believe that given the various underlying drivers for the sector, that the trend in healthcare investing is unlikely to go away. This is particularly relevant when we consider where we are in the cycle, as in times of recession and falling markets, stable and defensive industries such as healthcare tend to be favoured investments. However, we do believe that going into 2019 that we need to be more cognisant of valuations while investing in sectors that are no longer screamingly cheap, which means the case for active management is more valid than ever.
WARNING: Forecasts are not a reliable indicator of future results.
WARNING: Past performance is not a reliable guide to future performance. The value of your investment may go down as well as up. These products may be aff ected by changes in currency exchange rates.
We continuously analyse markets to identify the best investment opportunities for our clients. Our team of analysts, economists and strategists pinpoint trends in the sectors they think will do well next year and potentially be good long-term investments.