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Market Outlook

International Outlook

Outlook
10 January 2024

Latest International economic and market outlook. 

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While investing is notoriously unpredictable, many ‘big picture’ trends can be forecast with a surprising degree of accuracy. For example, we can say with a high level of conviction that human progress will continue to be driven by technological advancement, which will disrupt existing business models and create new opportunities for growth. Demographic and sociological trends are also highly forecastable: aging populations require more healthcare, and wealthier societies demand more leisure. Moreover, macroeconomic analysis can help us differentiate between those economies that are likely to thrive and those likely to stagnate. Finally, climate change is a real and present threat to society, as well as an opportunity for those firms that can help us address this risk. By aligning our portfolio with the most powerful and predictable long-term growth drivers, we expect it to generate sustainable outperformance for clients. 

Exposure to these overarching themes runs throughout the portfolio. For example, in technology we have exposure to AI. After decades of research, generative AI has gone mainstream and the hype appears to be justified. Language is fundamentally a shared representation of the world, and by recognising patterns to identify relationships between words, AI can learn a usable model of the world. Whilst being able to pass the Turing Test and appear to demonstrate human-like intelligence is impressive, the real reason that Large Language Models are so profoundly transformative is that, by understanding the nature of language, they understand the world. This powerful technology could automate between 15-50% of work tasks in today’s economy. Clearly this will be hugely disruptive, with a total addressable market of somewhere between massive and revolutionary. We have a high conviction view that the value created from applying AI will be enormous. We have exposure through the likes of ASML. 

In the environmental theme, we own companies such as wind turbine and foundation installation vessel operator Cadeler.  The offshore wind industry cannot grow and help the planet decarbonise if there are no vessels to install the turbines and foundations they rest on. At the leading edge where windfarms are moving further offshore towards greater wind resources, using larger turbines and operating at greater seabed depths, the pool of capable players that can conduct installation work is very limited, with Cadeler being the clear leader.

In the demographic and sociological theme we have exposure to GLP-1 agonists, a highly effective new class of drug to treat the growing global healthcare problem of obesity and its associated conditions. We own Gerresheimer and Schott Pharma, which operate in the drug packaging and delivery space, with products including cartridges, vials and syringes. We believe this is a structural growth area, given the aforementioned new class of injectable obesity drugs and the rapid growth of biologics, which again often require an injection.

Finally in the macro theme we have exposure to Indian banks as we expect a turn in the investment cycle, continued government investment, and increased investment from multinationals to capture India’s domestic market and diversify their manufacturing bases away from China.

Important Information:
Nothing in this document constitutes or should be treated as investment advice or an offer to buy or sell any security or other investment. TT is authorised and regulated in the United Kingdom by the Financial Conduct Authority (FCA).

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