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Credit Suisse Supertrends: outperformed in 2021 transcending business cycles and volatility
The COVID-19 pandemic and Russia’s invasion of Ukraine have led to greater volatility in financial markets, putting the Supertrends long-term equity thematic framework to the test. However, the Supertrends were able to outperform the MSCI World Index in 2021.
Five years after their launch, Credit Suisse’s Supertrends continue to focus on long-term and multi-year societal trends that should lead to fast-growing business opportunities. Recent market volatility has not significantly affected our long-term overall conviction across all Supertrends, though some short-term catalysts have tended to favor certain Supertrends.
The Infrastructure and Climate change Supertrends, for example, benefited in particular from solid tailwinds in 2021 due to large-scale infrastructure projects, as well as political support for climate change action at key events like the COP26.
Michael Strobaek, Global Chief Investment Officer at Credit Suisse, says: “We designed our Supertrends to transcend business cycles in order to offer investors multi-year equity investment opportunities. Although short-term catalysts tend to favor some Supertrends over others, we want investors to look beyond short-term sentiment and financial market volatility. The Supertrends offer an opportunity to help investors reach their financial, societal and environmental goals. As more and more investors move in this direction, we believe our Supertrends are here to stay.”
"All of the Supertrend themes are mapped to the 17 United Nations’ Sustainable Development Goals (SDGs). In order to capture this link effectively, we track the progress of the overall UN SDG framework and closely monitor the alignment of our investment themes with the SDGs. It is encouraging to see our Supertrends contribute positively to broader development goals while delivering returns to investors,” says Nannette Hechler-Fayd’herbe, Head of Global Economics and Research at Credit Suisse.
The long-term equity investment trends are outlined below:
- Anxious societies: While COVID-19 remains a worry for many people, it now ranks below concerns about poverty, social inequality and unemployment. Businesses, as well as investors, have an important role to play in finding solutions. The recent spike in inflation has ushered in more challenges to affordability, especially for housing and food, paving the way for companies that can address this challenge.
- Infrastructure: 2022 looks set to be the start of a multi-year infrastructure boom as government spending for new infrastructure programs kicks off in the USA and Europe. Most of the spending is slated to go to transportation, the energy transition and communications infrastructure. Inflation tends to be positive for the infrastructure sector because companies in the transportation and regulated utilities industries have price escalators (linked to the consumer price index or a sector-specific measure of inflation) embedded within their contracts.
- Technology: Starting in November 2021, technology stocks have repriced to reflect a higher interest rate world, as well as the fact that the very high growth rates during the pandemic will not be sustainable going forward. Yet the digital revolution still has far to go, with new catalysts such as the Metaverse giving impetus to this trend. Investments in digital marketing, production, and sales and distribution in the Metaverse should increase, as the population of this virtual world expands.
- Silver economy: Central to the Silver economy Supertrend lies the projection that the world’s senior population will double to more than two billion by 2050. This shift will create demand, but also unearth challenges that call for innovative solutions – in healthcare, insurance and consumer and property markets. Therapy areas of particular importance include cardiovascular disease, oncology and neurology. Outside of the healthcare sector, the Silver economy also has exposure to financial companies, which should benefit from the rising interest rate environment, along with select consumer names.
- Millennials’ values: Supply chains and consumption trends have yet to return to normal after the COVID-19 crisis, creating a volatile consumer environment in the short term. But the long-term trends are solidly anchored. For example, the young generation is set to integrate simulated digital environments into everyday activities. Sustainability also plays a pivotal role for the younger generations in their daily consumption habits. They are very concerned about the environment and motivated to drive change by adopting more sustainable lifestyles, especially in emerging markets where a majority of this cohort lives*.
- Climate change: Looking at short-term developments in this area, the recent increase in energy prices should act as a catalyst to cut the world’s dependence on fossil fuels for electricity production and transportation. The global food system, responsible for well over 20% of global greenhouse gas emissions (GHG), is also in the process of reducing its carbon footprint and offers long-term opportunities for a broad range of industries.
*For in depth information about how important sustainability is for young consumers please also read our ‘The young consumer and a path to sustainability’ report.
The new Supertrends report is available here: www.credit-suisse.com/supertrends.