Page 19 - Investment Advisor April/May 2023

are simply in a cyclical slowdown. If you firm said. While U.S. equities have been 6 Manufacturers Benefit From
can find companies set to re-accelerate almost impossible to beat for decades, Reshoring — And So Do Investors
when the economy improves, you may partly because of the strong dollar, non- Manufacturers want to be closer to
find promising buying opportunities.” U.S. markets may finally be able to over- their markets, for ethical, environmen-
Streaming companies and ad-based take them, Jonsson said. She expects to tal and supply chain reasons, Jonsson
social networks face tough new competi- build up the non-U.S. part of her portfolio. noted. “It’s a theme for almost every
tion, so investors should focus more on prof- industry and possibly why inflation
itability than in the past, according to Romo. 4 Health Care Breakthroughs will stay higher longer, and compa-
Cloud computing growth has slowed, but Make for a Hot Market nies will benefit from it,” she said.
that may be cyclical, as cloud company “We are in an incredible age of discovery Siemens Energy, Keyence, Schneider
fundamentals remain strong, he said. The in health care,” said Jonsson, who said Electric, Rockwell Automation and
semiconductor industry has struggled with she’s never seen the market this fertile Parker Hannifin may be among those
oversupply but may be set for a powerful in her more than 30-year career as a benefitting, the firm said.
cyclical recovery long-term, he added. portfolio manager. Top destinations for companies redi-
Romo also believes artificial intelli- Both discovery pace and market sizes recting manufacturing from China are
gence is at an inflection point, and noted are growing, with companies on the Southeast Asia, India, Mexico and the
the pace of new technology adoption is verge of solving obesity and other seri- U.S., the firm noted. Equity portfolio
accelerating: “We’re starting to think ous conditions, she said. Resolving obe- manager Winnie Kwan predicted in the
across a number of industries where this sity is “pretty revolutionary” in what it accompanying report that reshoring will
technology can be applied.” In addition, can do for public health, she said, adding be one of the more important invest-
underlying blockchain technology has that personalization and digitization in ment themes in the 2020s.
applications for many industries, and healthcare are also exciting.
smaller companies likely will leverage it, Jonsson focuses on companies with 7 Core Bond Funds Bring
something the firm is watching closely. “picks and shovels” that supply everything Portfolio Stability
associated with the therapy discovery pro- Capital Group has been suggesting
3 Global Champions Will cess and said it’s not necessary to pick investors strengthen their core bond
Thrive on Adaptability
winners in the drug discovery race if you
portfolio. Despite a disappointing per-
“Investors are concerned about de-glo- invest in their suppliers. Gene therapy and formance in 2022, when stocks and
balization and assume it is negative for other regenerative medicine generated bonds broke from their long-term pat-
portfolios,” Jonsson wrote. “It can be, but $21 billion in revenue last year and should tern and both lost value, bonds should
changes in trade patterns generally favor achieve $96 billion in sales by 2030, the again play an important role in a diversi-
global champions — what I call industry- firm said, citing figures from Statista. fied portfolio, according to the firm.
leading multinationals that can adjust to Slowing economic growth is “nirva-
the changing landscape. The COVID-19 5 Energy Drives an na” for core bonds, fixed-income portfo-
crisis shed light on the importance of Industrial Renaissance lio manager Pramod Atluri wrote in the
resilience over efficiency, and companies Four trends are contributing to an indus- report. “Slowing growth, declining infla-
are responding by establishing redun- trial renaissance, according to Capital tion, higher yields and a Federal Reserve
dancies in supply chains. That’s creating Group: U.S. energy investments, European nearing the end of its hiking cycle all add
opportunities for companies that help energy security, supply chain reshoring, up to a fantastic opportunity for core
build factories and expand supply lines.” and aerospace and defense spending. bond funds to generate mid-single-digit
Global champions can do well Green battery technology and deglo- total returns and, once again, provide
in almost any environment, she said. balization, which will require a metals- ballast to a portfolio,” he said.
Capital Group noted that more than intensive shift, should bode well for
2,000 non-U.S. companies generate at metals and mining, including companies 8 Company Cash Flows Face
least $1 billion in sales, compared with like Caterpillar, Romo said on the web- Increased Scrutiny
1,451 in the U.S. “It’s more important cast. Other companies that could benefit Credit fundamentals may return as infla-
than ever to be global,” Romo said. include Emerson Electric, Eaton, ABB, tion cools and rate hikes slow, according
Investors should focus on nimble mul- General Electric, Halliburton, Baker to Capital Group. “For bond investors,
tinational companies that can respond to Hughes, Raytheon, Boeing, Honeywell finding companies that are inventing
change, regardless of local conditions, the and Lockheed Martin, the firm said. the next big thing is less important than

APRIL/MAY 2023 INVESTMENT ADVISOR 17