This is an excerpt of the report “Supertrends 2022 — Here to stay. From societal trends to investor impact.” , with the title above, focusing on the topic in question.
Credit Suisse
Michael Strobaek; Nannette Hechler-Fayd’herbe, Daniel Rupli
July 2022
Excerpt by
Joaquim Cardoso MSc.
Health Revolution — Institute
Institute for better health, care, costs, and universal health.
Supertrends — Unit
July 1, 2022
Supertrends 2022 Here to stay — From societal trends to investor impact.
The COVID-19 pandemic and, more recently, Russia’s invasion of Ukraine have led to greater volatility in financial markets, putting our Supertrends long-term equity thematic framework to the test.
We designed our Supertrends to transcend business cycles in order to offer investors multi-year equity investment opportunities.
This means that fluctuations in short-term sentiment and financial market volatility, as we saw during the first quarter of 2022, do not significantly affect our long-term overall conviction across our Supertrends.
… fluctuations in short-term sentiment and financial market volatility, as we saw during the first quarter of 2022, do not significantly affect our long-term overall conviction across our Supertrends.
That said, short-term catalysts tend to favor some Supertrends over others.
Investors have thus adopted a dynamic approach to our Supertrends, i.e., giving a greater weighting to certain Supertrends compared with others in portfolios — just as they would with equity investments across regions or sectors.
The diversification of the framework — across 23 subthemes and six Supertrends — also helps to cushion the impact of sector rotations.
We continue to develop our Supertrends. In 2021, we took an important step and mapped all of the themes to the United Nations’ 17 Sustainable Development Goals (SDGs).
The SDGs represent a guiding principle for economic activity and development and, increasingly, investing.
In order to capture this link effectively, we track the progress of the overall UN SDG framework and closely monitor the alignment of our investment themes and stock selection with the SDGs.
With regard to the single stocks within our Supertrends, for example, we track the monthly SDG scores since our frameworks’ inception using MSCI environmental, social and governance (ESG) data.
We have observed stable to positive (albeit slow) progress overall; it is encouraging to see our Supertrends contribute positively to broader development goals while delivering returns to investors.
Our Climate change Supertrend — unsurprisingly — has shown the most progress, with solid improvements in SDG 7 (affordable and clean energy), SDG 9 (industry, innovation and infrastructure) and SDG 13 (climate change) scores.
Looking at the other Supertrends, companies within our Millennials’ values, Infrastructure and Technology Supertrends also improved their sustainability scores, …
… while the scores of Anxious societies and Silver economy moved sideways.
Our Climate change Supertrend — unsurprisingly — has shown the most progress …
… companies within our Millennials’ values, Infrastructure and Technology Supertrends also improved their sustainability scores, …
… while the scores of Anxious societies and Silver economy moved sideways.
The Supertrends offer an opportunity to help investors reach their financial, societal and environmental goals. As more and more investors move in this direction, we believe our Supertrends are here to stay.
Synthesis of Trends:
- 1.Anxious societies — Inclusive Capitalism
- 2.Infrastructure — Closing the gap
- 3.Technology — At the service of humans
- 4.Silver economy — Investing for population aging
- 5.Millennials’ values — Gen Z and Y
- 6.Climate change — Decarbonizing the economy
Supertrends — Creating impact
The year that has passed since our last publication has once again confirmed the relevance of our Supertrends.
Equity investors benefited in 2021 from the strong global economic recovery and investment returns that were substantially above their historical average.
Our Supertrends even managed to outperform the MSCI World. Yet there were clear differences in performance across styles and sectors.
Our Infrastructure and Climate change Supertrends, for example, benefited in particular from solid tailwinds in 2021 due to large-scale infrastructure projects, as well as political support for climate change action at key events like the COP26.
Turning to the current year, investors should expect lower returns, in our view, as companies and consumers grapple with the highest inflation in decades.
In the last quarter of 2021 and the first quarter of 2022, investors started to rotate into value stocks from growth stocks, with the energy and financial sectors making up some lost ground in recent months.
Turning to the current year, investors should expect lower returns, in our view, as companies and consumers grapple with the highest inflation in decades.
Our strong diversification approach across the 23 Supertrends subthemes is helpful when navigating turbulent markets.
We believe that our more defensive Supertrends, as well as the long-term demographic trends in our Silver economy Supertrend, should prove less volatile this year than the growth-style themes in Millennials’ values and Technology.
The Silver economy focuses on healthcare companies that will likely benefit from rising demand and strong earnings growth as societies age.
Therapy areas of particular importance include cardiovascular disease, oncology and neurology.
Outside of the healthcare sector, the Silver economy also has exposure to financial companies, which should benefit from the (higher) interest rate environment, along with selected consumer names.
The Silver economy focuses on healthcare companies that will likely benefit from rising demand and strong earnings growth as societies age.
Therapy areas of particular importance include cardiovascular disease, oncology and neurology.
Earlier this year, geopolitical tensions put the Personal security subtheme within our Anxious societies Supertrend back into focus.
Cyber security in particular remains a key conviction, so do our Affordability and Employment subthemes.
The recent spike in inflation has ushered in more challenges to affordability, especially for housing and food, paving the way for companies that can address this challenge.
Inflation tends to be positive for the infrastructure sector — and our Infrastructure Supertrend — because companies in the transportation and regulated utilities industries have price escalators (linked to the consumer price index or a sector-specific measure of inflation) embedded within their contracts.
We also expect a positive impact from the removal of COVID-19-related travel restrictions, which should provide another boost for domestic toll road operators as well as international air travel investments.
From a political standpoint, COP26 highlighted the climate change challenge and we anticipate the further buildout of renewable energy infrastructure (e.g., solar and wind farms) and smarter electricity networks to remain a top policy goal for many governments.
Germany’s new coalition government will be taking the lead in Europe, while a possibly scaled-down version of US President Joe Biden’s stalled Build Back Better plan would support investments for renewable energy, energy-efficient housing and electric vehicle (EV) infrastructure in the USA.
This should give our Climate change Supertrend another boost in terms of its growth-style themes, including CO2-free electricity and sustainable transport.
About the authors
Editor-in-chief
Nannette Hechler-Fayd’herbe
Authors
Daniel Rupli
Reto Hess
Jens Zimmermann
Uwe Neumann
Lorenzo Biasio
Julie Saussier
Pedro Iglesias De La Vega
Samuel Traub
Preface
Michael Strobaek, Global Chief Investment Officer, Credit Suisse
Nannette Hechler-Fayd’herbe, Head of Global Economics & Research, Credit Suisse
Daniel Rupli, Head of Single Security Research, Credit Suisse
Originally published at https://data.maglr.com
