Growth, Change and Opportunity

Hunger, poverty, and corruption. Those were the images that came to mind 50 years ago when people spoke about the Third World or so-called underdeveloped countries.

Then Antoine van Agtmael had an idea that would change how investors think. In 1981, he coined the term “emerging markets” and reframed the narrative. Almost overnight, the tone shifted to something more constructive: growth, transformation, and opportunity in capital markets.

Today, depending on the definition, even highly developed economies such as Taiwan and South Korea fall under that label.

A constructive outlook for equities.

This week, Gutmann informed clients that we have allocated an additional 5 percentage points of our global equity strategy to emerging markets. In recent years, our focus has been on the U.S., Europe, and Japan. We have now broadened our investment universe.

With this addition, we have moved our overall equity allocation back to overweight. That reflects our continued positive view on financial markets. At the same time, we are not getting carried away. Our broad diversification and a meaningful allocation to defensive dividend names make that clear.

The situation surrounding Iran has unsettled some investors and caught others off guard. Yet even without a clear resolution, equity markets quickly absorbed the short-term setbacks and resumed their upward path. That has worked in favor of those who stayed invested.

Artificial intelligence is another source of uncertainty for many. We continue to review all portfolio companies with a critical eye on how their business models may be affected. For now, the market is focused on one key factor: the potential productivity gains and the resulting impact on profits.

Earnings season is providing additional support. So far, 84% of large U.S. companies that have reported have exceeded expectations.

Chasing only the high-flying AI names would be too risky for us. A well-constructed portfolio spreads exposure across themes, sectors, regions, and individual companies. In our view, that remains the only sensible approach.