This article was first published in Le Temps of 8 May 2023.
While Japanese equities were popular with Swiss asset managers in the late 1980s, the world’s 4th largest economy has now all but disappeared from our portfolios. Perhaps the time has come to turn our sights back to the Rising Sun, because after a long stock market winter, Kabuto-Cho could be in for a bright new dawn.
While the climate emergency is becoming more pressing by the day, our country is continuing its usual policy of (very) small steps at a slow pace. And while solar power is now the cheapest source of electricity, we continue to rely heavily on fossil fuels.
The need for infrastructure is such that even massive government plans will have to be supplemented by private funds. And that’s just as well as these investments are particularly attractive, especially in times of inflation.
As we are coming out of the summer holiday season, it is worth pondering over what has been one of the most complex investment environments for a long time. Between the concern over economic growth, a resurgence of inflation and an extraordinarily tense geopolitical situation, there has been very little space to hide in financial markets.
The rise in interest rates and the rethinking of globalisation should mark a return to active management and fundamental research.
2022 currently feels like a perfect storm: lingering COVID, war in Ukraine, the return of inflation, recession. There have been very little places to hide as markets are absorbing the daily grind of bad news.
In addition to its impact on the global economic order, the invasion of Ukraine will accelerate the energy transition and force investors to be more selective.
The tragedy in Ukraine could lead to a real paradigm shift and the emergence of a new world order. Some of the possible consequences, such as a slowdown in world trade, rearmament and a return to confrontation between the major strategic blocs, are a step backwards. But others, such as the realisation of our dependence on fossil fuels, could give a massive boost to the energy transition.
Every year, investors play scare tactics with worries about the dangers in the markets. Yet, with a combination of reasonable investment horizon and management discipline, they can usually put their minds at ease and forget about short-term predictions.
While the financial sector is often accused of greenwashing, it is important to remember that responsible investments can only be made with truly sustainable companies. This is why sustainability reporting standards for companies are essential.