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Global tech and healthcare stocks to drive equity returns in 2024

05 March 2024 Old Mutual

Amidst ongoing market turbulence and shifting global economic prospects, Old Mutual Investment Group forecasts a promising trajectory for global equity portfolio returns in 2024, buoyed by shares in the global healthcare and technology sectors, which are poised to drive global equity portfolio returns over the period.

This comes as financial markets respond positively to anticipated shifts in inflation and interest rates, coupled with the latest robust US employment data.

The healthcare sector, particularly the biopharma sub-sector, has seen budget cuts post-COVID-19 due to the decline in pandemic-related sales. However, Maahir Jakoet, manager of the global Islamic equity offering at Old Mutual Investment Group, remains confident that the sector is experiencing a resurgence in investor confidence thanks to the digital revolution.

"The sector is being revolutionised by AI, medical imaging, telemedicine, and wearable monitoring devices," says Jakoet.

Pharmaceuticals and biotechnology, with substantial R&D budgets, are expected to be significant drivers of growth in the sector. Investors who strategically position themselves in certain companies are poised for a good year. According to Jakoet, healthcare businesses with high barriers to entry and sustainable competitive advantages, such as Novo Nordisk and Eli Lilly, are positioned to thrive, particularly in areas such diabetes and obesity medication.

Jakoet, whose global Islamic equity offering adheres to a Shariah-compliant process, anticipates some continuation of the stellar performance seen in 2023 by the healthcare and global technology sectors, including the renowned 'Magnificent Seven'. Meta and Alphabet are Jakoet's preferred choices within this elite group.

The strategic positions held by Jakoet's fund in these sectors yielded an impressive 31.3% return over the 12 months ending December 2023, earning him the Citywire Best Global Equity Manager Award. On the other hand, the MSCI ACWI Index, which is used as a benchmark for global equity funds, returned 22.8%.

Currently, however, market volatility continues to persist due to uncertainty regarding anticipated interest rate cuts. Despite January's significant job growth in the US, the US Federal Reserve (the Fed) remains committed to its planned rate cuts.

Nonetheless, regardless of whether the Fed begins cutting rates at its next meeting or in spring, as previously indicated, Shariah-compliant investing offers an attractive alternative for all investors due to its overall indifference to interest rates given it does not invest in credit-based instruments. This unique feature enhances attractiveness as a compelling investment option, especially in times like these when interest rates significantly influence market dynamics.

Contrary to common belief, Jakoet stresses that Shariah-compliant portfolios are not only limited to faith-conscious investors, adding that approximately one in five investors in the asset manager’s Shariah-compliant retail portfolios are non-Muslim.

“This highlights the offering's broad appeal as a diversified investment option that addresses ethical, faith-based, and environmental, social, and governance (ESG) considerations,” Jakoet says.

Jakoet adds that the fund’s position has been reinforced by recent market trends, where risk assets have rebounded following adjustments to US Federal Reserve policy. However, at this volatile time we are cognisant that the market could turn at any time; we therefore ensure that we continue to build a portfolio that can take market shocks should they arise,” he concludes.

For investors seeking ethical and diversified exposure to global equity markets, Old Mutual Investment Group's global Islamic equity investment option offers investors a compelling opportunity for superior investment returns. With a focus on high-quality, attractively valued companies with favorable long-term growth prospects, the offering is suitable for investors with moderate to high-risk appetites.

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