RBC Brewin Dolphin looks at the themes that could be important to this year’s returns.
UK funds that would benefit from a more stable political situation, US tech trackers and funds investing in easing climate change could do well this year if some key themes continue to play out in markets, according to RBC Brewin Dolphin.
Rob Burgeman, senior investment manager at RBC Brewin Dolphin, said: “The year may only be a month old, but some clear themes are already beginning to shape markets. There have already been some surprises – not least in the latest UK inflation data – and there will undoubtedly be more to come.”
Below are four themes that the wealth management firm has noticed in 2024 so far and the funds it thinks could benefit.
A big 2024 for UK politics
One of the over-arching themes of 2024, no matter where you are on the planet, is politics. At least 64 countries (as well as the European Union) are going to the polls this year, with around half of the world’s population casting their vote in national elections.
“Politics will be at the forefront of many people’s minds this year, with a UK general election a certainty before January 2025,” Burgeman said.
“The indications are that there will be an election in the autumn, with the gamble that the economy will show signs of recovery and the incumbent government – which has trailed heavily in recent polls – may have an easier go.”
He argued that the UK stock market – which has languished compared with other countries’ in recent years – could start to appeal to international investors if the post-election political scene is “more settled”.
Burgeman suggested that a tracker such as Vanguard FTSE U.K. All Share Index is an efficient and cheap way to get exposure to the UK market, while abrdn UK Mid Cap Equity and its exposure to more domestically focused medium-sized companies is a good way of benefitting from any boost to the wider UK economy.
Don’t forget about the US
The US is another of the major economies with a national election this year, with the country choosing its president in November.
Although several months away, the election is already gaining attention with former president Donald Trump – the likely Republican candidate after his wins in the New Hampshire primary and the Iowa Caucuses – grabbing the headlines with controversial statements.
Meanwhile, incumbent Joe Biden is presiding over a US “that is doing OK” but “struggling to reap the benefits”, Burgeman said.
“Nevertheless, it would be dangerous to underestimate the continued strength of the US economy – it will continue to lead in key sectors, especially technology, which should drive the global economy,” he added.
Those interested in just tracking the US market could look to something like SPDR S&P 500 ETF for broad exposure or the Invesco Nasdaq 100 tracker for more of technology tilt.
“A more active approach can be found with the likes of GQG Partners U.S. Equity fund, which is more momentum driven, switching between value and growth and between sectors as its management team deems appropriate,” Burgeman said.
Continuing challenges in Asia
There has been a lack of progress in the Chinese economy over the past year, despite initial optimism after the country re-opened from its Covid lockdown, after a collapse in the property market hit confidence.
In addition, the Chinese government has launched a series of market interventions in areas such as technology and education, which caused sharp falls in share prices for the companies affected.
Burgeman added: “Looking for a recovery in Asia more generally – an underperforming area over the past year – is a challenge.
“However, BNY Mellon Asian Income is notably underweight in its exposure to China. A more traditional exposure can be achieved via the HSBC MSCI Pacific ex Japan ETF.”
Green is back
The final theme that RBC Brewin Dolphin expects to be important in 2024 is the transition to green energy, which will demand significant investment if the world is to address the climate change crisis.
“Green investment has not had a good couple of years, but this reflects how overblown the story behind some companies in this theme became – particularly during the pandemic,” Burgeman explained.
“Yet, the uncomfortable truth is that the challenges many of these businesses face remain very relevant and governments need to take action to, at the very least, slow the pace of change.”
He pointed to Pictet Global Environmental Opportunities as a fund that could do well if spending on solving environmental issues starts to pick up. It invests in companies with an environmental theme.
Schroder Global Energy Transition is more focused on companies related to the energy transition, with holdings ranging from renewable technology to electric vehicles and chemicals.
