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Taking Stock

Our quarterly investment trust magazine.

Reaching A Peak? Investing Through Economic Cycles

It’s widely accepted that economies and markets move in cycles, from trough, up to expansion and peak, and then through contraction on the way back down to the trough. What isn’t so widely agreed on is where in that cycle we are now.

Last time in Taking Stock we asked whether some recent developments – from global trade wars through Trump-style diplomacy to Brexit – were just part of a natural ebb and flow in the global political and economic order, or if we’re now seeing more fundamental change.

This time we ask a similar question of the current economic cycle. More than nine years after the beginning of a post-financial crisis bull market that has long confounded expectations, some believe the signs are there that this cycle is finally peaking and we’re about to enter a period of contraction. But others suggest there is still more growth to come.

Highlights:

  • Finding real growth in the global economy – US economic growth is accelerating and valuations point to a rosy outlook. But that growth is being driven by policymakers and may be artificial, says Flavia Cheong of Aberdeen Asset Managers, who points to Asia for the real economic growth story.
  • It’s déjà vu all over again – Alasdair McKinnon of The Scottish Investment Trust feels a sense of deja vu as investors threaten to ignore the lessons of history and repeat the mistakes of the past. He explains why the crowding instinct of humans doesn’t always translate well to investing.
  • Getting the measure of volatility – While it might not always be welcome, volatility is inherent to the nature of investing. Knowledge is power, particularly when it comes to understanding how volatility is measured. James McCafferty of Alliance Trust Savings is your guide.
  • Can metals be made to shine? – After seven years of instability and lacklustre returns there are signs of normality returning to the metals sector. Hannah Gray, of the Natural Resources team at BlackRock, looks at the lessons that have been learned from the downturn and identifies new opportunities for investors.
  • Cyclical tipping point? Investing beyond the peak – History gives us an idea of what might come next, but it doesn’t tell us when or how long it will last. For long-term investors though, it might not really matter. Ciaran Mallon, UK Equities fund manager at Invesco Perpetual, looks at why it’s the bigger picture that really matters.
  • An investment story for the 21st century – With more than 40 years experience of investing in technology companies, Walter Price knows a thing or two about identifying the firms of the future. The senior portfolio manager at Allianz Technology Trust shares his insights into picking the winners in a fast-moving world.
  • Growth, income & dependability – Against the backdrop of a cloudy economic outlook, demand for sustainable income remains strong. James Dow, co-manager of the Scottish American Investment Trust, explains how his team finds the companies that enables them to meet that demand.
  • Alliance Trust: All-weather global equities – Market cycles suggest that while investors don’t know exactly when the bull market will end, they can expect it to do so sooner rather than later. That’s why it pays to invest only in what you believe in, according to Craig Baker, Chief Investment Officer at Willis Towers Watson.
  • Economic cycles explained – It may feel like the current bull market will never end. Yet history tells us that it’s only a matter of when, not if, things will change. Alliance Trust Savings’ Sara Wilson looks to the theory of economic cycles to consider what may happen next and what it would mean for investors.

Please remember the value of your investments and any income from them can go down as well as up and you may get back less than the amount you originally invested.

Investment Trusts may borrow to finance further investment (gearing) . The use of gearing is likely to lead to volatility in the Net Asset Value (NAV) meaning that a small movement, down or up, in the value of a Trusts assets will result in a magnified movement, in the same direction, of that NAV. This may mean that you could get back nothing at all.

If you are unsure if a particular Investment Trust is suitable for you, you should seek independent financial advice making making any investment decision

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Alliance Trust Savings Limited is a subsidiary of Alliance Trust PLC and is registered in Scotland No. SC 98767, registered office, PO Box 164, 8 West Marketgait, Dundee DD1 9YP; is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, firm reference number 116115. Alliance Trust Savings gives no financial or investment advice.