The global economy is delicately balanced, with interest rates, geopolitics, US policy and trade wars all in the mix. Many investors look at global equities and see only risk: slow earnings growth, stretched valuations and mounting uncertainty. But it’s important to see the bigger picture – opportunities remain for those who can navigate volatility with clarity.
After a broadening rally earlier in the year, the April sell-off cleared the decks. Since then, the Magnificent 7 have reasserted some leadership. It’s a reminder that while diversification matters, markets are still swinging between extremes, again reinforcing the knife’s-edge environment we’re navigating.
Story stocks have shown cracks. Real earnings, real cash flow, real resilience – that’s the anchor. The companies we hold in our global equity portfolios have continued to deliver double-digit US dollar earnings and free cash-flow growth, even as index-level returns wobble. Investors should seek exposure to businesses that have growth, not the ones that have the perception of growth and high valuation risk – because that’s where real vulnerability lies.
We see two possible scenarios: a successful shift to a more balanced, less debt-fuelled economy versus the risk of slowing growth and deflationary pressure. Either way, the next phase for markets will be noisy. There is widespread chatter that this is the beginning of a major bear market for US assets, the US economy and the dollar. But, for the dollar to depreciate over time, investors have to believe that opportunities in other jurisdictions are much more compelling. Europe still faces the burden of higher defence spending, while many emerging markets are wrestling with their own idiosyncratic challenges. Just because the US has lost some of its shine doesn’t mean other countries or regions have better prospects.
Many of our largest global equity holdings, such as Booking Holdings1 and Philip Morris International, may be US-listed but they earn the bulk of their revenues offshore. If the dollar weakens, their earnings get a lift, not a haircut. We believe there are significant opportunities for these companies to continue to do well, even if investors have an adverse view around the macro picture. Ultimately, it is the fundamental drivers of businesses – not top-down regional allocations that matter most.
With rate cuts on the horizon, both local and global cash will become less rewarding. Bonds and gold still play a role – but global equities that demonstrate true earnings resilience stand at the heart of Global Franchise’s equity allocation.
This isn’t the time for passive exposure or macro bets. It’s a time for quality – for deliberate selection and high-conviction positioning. For investors traversing the narrow ridge, this means focusing on resilient companies that can deliver real growth over the longer term.
1. No representation is being made that any investment will or is likely to achieve profits or losses similar to those achieved in the past, or that significant losses will be avoided. This is not a buy, sell or hold recommendation for any particular security.
General risks. All investments carry the risk of capital loss. The value of investments, and any income generated from them, can fall as well as rise and will be affected by changes in interest rates, currency fluctuations, general market conditions and other political, social and economic developments, as well as by specific matters relating to the assets in which the investment strategy invests. If any currency differs from the investor’s home currency, returns may increase or decrease as a result of currency fluctuations. Past performance is not a reliable indicator of future results. Environmental, social or governance related risk events or factors, if they occur, could cause a negative impact on the value of investments.
