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Credit Suisse updates long-term investment trends against backdrop of unprecedented COVID-19 pandemic
The coronavirus (COVID-19) outbreak is an unprecedented global threat that will likely lead to long-term changes in the way we think, work and live – with implications for investors. Against this backdrop, Credit Suisse has just published its annual update to the Supertrends, its framework for high-conviction, long-term thematic equity investments. While the COVID-19 pandemic has upended the global economy, the latest update has reconfirmed the core aspects of the original five investment trends. Moreover, a sixth trend was added to focus on climate change.
Launched three years ago, Credit Suisse’s Supertrends focus on multi-year societal trends believed to lead to fast-growing business opportunities. Each of the investment trends identifies opportunities expected to outperform as a result of these shifts. That said, the key societal, political, economic and environmental issues they touch upon are in continuous flux, and today’s updated Supertrends report also considers the changes brought about by the COVID-19 pandemic.
“Our normal way of life has ground to a halt because of the coronavirus pandemic. This crisis is challenging existing systems and structures, sowing the seeds for further change ahead as we uncover limitations in how we learn, work and live. Our Supertrends continue to evolve with the changing world around us, and we believe that they remain compelling investment themes for today and the future,” explains Michael Strobaek, Global CIO, Credit Suisse.
The updated long-term investment trends, first introduced in 2017, are outlined below:
- “Climate change – Decarbonizing the economy” is based on the investment case for companies that contribute most effectively to the transition to a less carbon-intensive world economy. The recent economic lockdown caused by the COVID-19 pandemic has reduced man-made greenhouse gas (GHG) emissions substantially in several regions – a clear signal of what the world could achieve in the future by creating a carbon-free and more sustainable global economy. The key sectors that this investment trend focuses on are carbon-free electricity production, transportation, oil and gas transition pioneers, and agriculture/food production.
- “Anxious societies – Inclusive capitalism” reflects the fact that popular discontent is now focusing more clearly on issues at home, in particular inequalities, rather than on perceived outside threats and a move toward protectionism. Anger has now ceded to anxiety. With a newly created index, Credit Suisse keeps track of whether anxiety is receding or increasing. The COVID-19 pandemic has shown that the real emerging threats are global and require multilateral cooperation, as well as individual protection.
- “Silver economy – Investing for population aging”: The aging population is likely to continue to drive business opportunities and investment performance for many years to come. In particular, population aging in emerging markets (EMs) will unfold at a speed not yet realized by most.
- “Infrastructure – Closing the gap”: Infrastructure spending remains on the verge of a boom phase. There are gaps everywhere as old economies struggle to address both existing as well as new needs, including a drive towards greater sustainability. At the same time, new economies continue to urbanize at a fast pace. The expectation of lower, and sometimes even negative, interest rates for an extended period should provide the right incentive for investment. As climate change concerns have attracted broad public attention, powerful regulatory and political catalysts should add further momentum to this theme.
- “Technology at the service of humans”: Ongoing technological innovation, as well as the challenges uncovered by the coronavirus crisis continue to make technology a compelling sector for investors. The drivers for this investment theme – in terms of demand as well as technological progress – remain powerful and firms in this theme’s areas of focus should benefit in coming years.
- Sustainability remains a key theme for “Millennials’ values” including responsible consumption, and we apply an environmental, social and governance (ESG) overlay to the entire stock selection. With health also at the top of the Millennials’ agenda, there is growing demand for healthy, sustainable food: the planetary diet. Hence, along with the transition to a circular economy, we have incorporated sustainable food into this investment topic.
The new Supertrends report can be found here.