It’s been called the age of uncertainty and, famously, ‘the new normal’. But global equity managers should feel they have dealt with the major investment themes playing out in markets worldwide at least once before. David Marvin, chairman and portfolio manager at $4.5 billion global equity shop Marvin & Palmer, laid out the broad bets he’s making at an ASFA lunch last month. He is overweight the fast-growing emerging markets and the energy, materials and industrial companies benefiting from this growth; and he favours the luxury goods businesses of Europe which are exporting increasing volumes of stock to the growing number of high-end consumers in the emerging world.
This sounds familiar to Marvin, who managed money through the succession of market crises that have rocked markets since the 1970s. “The portfolio that worked in 2007 is the one you want today. It just got interrupted by the financial crisis,” he says. But there is one addition. It’s what many investors currently see as the most promising sector of the US economy: the third phase of the revolution of computing technology. Computers are now mobile, systems are being run from the cloud and personal computers seem as if they are going the way of the mainframes. This theme is primarily a US play, he notes, but also applies to Taiwan and South Korea. Marvin is confident the risks giving investors headaches will not jeopardise the success of these themes.
By continuing the US Federal Reserve’s quantitative easing program, Ben Bernanke is attempting to avoid emulating the mistake made by Japanese authorities in the late 1980s, which pricked the nation’s immense real estate asset bubble, causing deflation from which it has not yet recovered. “Bernanke would rather have more inflation.” He is not too fazed by high oil prices – “which means you spend more on gasoline than beer or wine” – but is genuinely fearful of an interruption in supply if the Middle East unrest incites an uprising in a major exporter, such as Saudi Arabia. As Europe, the UK and some US states toil through debt crises, Marvin remains bullish. “Why? Because the market is forcing change.” And as governments and their electorates face these problems, investors’ unease pushes stock valuations lower.
