• Quarterly outlook

Equity outlook: Investing for the long haul

In our July equity quarterly we review more tech-led record highs in developed markets, buoyed by solid earnings, and in the emerging world we analyze how recent election surprises could impact the outlook.

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Authors

    Global Head of Fundamental Equity
    Portfolio Manager
    Head of Emerging Markets team

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Summary

  1. Tech giants generating cash and profitable growth
  2. Earnings save the day in developed markets
  3. Election season driving change in South Africa, Mexico and Brazil


This quarterly was finalized in the last week of June, when we held a Institutional Masterclass conference for our largest Asian clients. Most of the questions we got were about the ‘Magnificent 7’, which was no surprise as some remarkable moves happened that week. Amazon surged and passed the USD 2 trillion market capitalization mark. Nvidia shot up by 7% in a day, recovering what it lost 24 hours before. Since the market cap of the company is now over USD 3 trillion, that one-day move was equivalent in value to the total size of companies like Shell, Pepsico or L’Oréal. Do we think this trend is for real?

We do not see this as just hype, and we invest a significant part of our portfolios in technology companies. These companies are highly cash-generative and succeed in turning enormous investment programs into product innovation and profitable growth. As an example, Amazon, Google and Meta spent respectively USD 138, USD 78 and USD 66 billion on capex and R&D* in 2023. To put this in perspective, USD 138 billion is about the market value of Unilever.

However, technology is not the only trend or idea we invest in. Diversification is a key attribute of the long-term success of our portfolios. As Audrey Kaplan, portfolio manager for the Sustainable Global Stars strategy, writes in her article, our global team finds attractive stocks across multiple sectors. Have a look.

This quarter we are celebrating 30 years of investing in emerging markets at Robeco. Playing the right trends at the right time, with an eye on long-term value creation, has delivered an annualized 2% outperformance.* That is 340%* better than the benchmark over the period! Wim-Hein Pals is one of the founders of the EM Core strategy and still going strong as lead portfolio manager. His outlook on emerging markets is bullish, and he lays out strong arguments. Also in this edition, Jaap van der Hart, lead manager for the EM Stars strategy, discusses his favorite investment ideas.

In a special commemorative book, which is separately available, we look back at the main lessons from those 30 years and we look ahead at the most attractive trends and countries for the next decade. Please reach out for a copy, as it shows how we view the long-term opportunity in EM. It’s an interesting read for the summer. Happy holidays!

* Data by Bloomberg and Robeco performance measurement.

Past performance is no guarantee of future results. The value of the investments may fluctuate.

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