Enduring structural themes to outlast the cyclicality of markets: from East to West

In this Fullerton Insights piece – Enduring structural themes to outlast the cyclicality of markets: from East to West, our Strategist, Robert St Clair, uncovers several investment themes underpinned by permanent structural drivers which have the propensity to ride out the volatility often associated with evolving market cycles.

In today’s volatile markets, that have been continually buffeted by geopolitical headwinds and macroeconomic shocks, investors may be tempted to adopt a short-term stance to investing. Such an approach however ignores the longer-term benefits of staying invested to capitalise on several structural trends, across financial markets which have the potential to outlast the intermittent market gyrations.

Some of these trends have been evident for many years and have a long runway ahead, as they reflect durable fundamental factors that may continue to play out, regardless of the wider macro backdrop and economic cycle, given that the drivers behind these themes are quite detached from the broader market.

This paper peels away the layers of the onion to dive deep into the core fundamental factors underlining the permanency of the structural gains in the identified areas. The five themes we are positive about are:

• Technological Advancement,
• Healthcare Needs,
• Great Power Competition,
• Climate Protection, and
• Changing Consumer Behaviour

A sixth ‘theme’, Earnings Visibility Amidst Inflation, is an evergreen trend that applies across all industries and is especially relevant to investors today as firms face greater cost pressures as they try to defend their earnings growth and market share.

What are our key takeaways?

The identified themes have the following key features:

Resilient to cyclical shocks, and more correlated with demographic trends, income per capita, behavioural spending habits, and regime changes.
Attractive sources of alpha for investors for the long-haul, irrespective of where we are in the economic cycle.
Spillover benefits across the investment themes as some key drivers are correlated, suggesting multiple avenues for investors to gain exposure and harvest alpha across different countries, interconnected sectors, and stocks.