Goldilocks economic conditions mean investing in sustainable growth companies makes more sense than ever
After a recent wild swing backwards, impacting almost all stocks, deserved or not, Insync Funds Management (Insync) anticipates Goldilocks economic conditions will soon prevail.
In a September email to investors, Insync CIO, Monik Kotecha says he expects economic conditions will be neither too hot, nor too cold and therefore investing in sustainable growth companies now makes more sense than ever.
“For the best part of 10 years, we’ve enjoyed the tranquil waters of low and stable inflation and even lower interest rates,” Mr Kotecha said. “That’s all changing. As we have just experienced, the rather dramatic swing with hikes in energy prices, interest rates and a temporary spike in inflation mean those days are over. Yet mostly economies and jobs are fine. The world continues to turn.”
While many companies will struggle in this new world, Mr Kotecha said a small group will thrive. “These companies have one thing in common – sustainable compounding earnings growth. The evolving economic backdrop is only accelerating the business performances of these types of stocks, which are backed by one or more megatrends.”
Insync has identified 16 megatrends which are providing tailwinds for growth, irrespective of the economy. “These megatrends include things such as demographic shifts, digitisation or even pet humanisation. They are the reason why we remain fully invested despite market swings and the often-touted fears of commentators,” he said.
Insync recently released an industry White Paper Will the second half and beyond for equities be different to the first?, setting out its equities expectations for the remainder of the year.
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