1、Supertrends. One year on. The Future. Now Investing for the long term. Supertrends. One year on. The Future. Now Investing for the long term. 3 Foreword Dear client When we launched our Supertrends, we had three objec- tives in mind. First, we wanted to develop a set of strong thematic equity invest

2、ment ideas. After years of relatively weak interest in equity themes, we were convinced that the time was right to propose a new thematic approach to our investors. After all, demanding valuations were calling for more conviction when investing in stocks. Furthermore, we expected monetary authoritie

3、s gradual exit from quanti- tative easing to lead to a return of equity market volatility and put passive equity invest ments in a more difficult spot. Second, we wanted to link the most significant societal changes with tangible investment opportunities. And third, we wanted to build our Supertrend

4、s in a way that would enable us to outperform the broader market in the long run. One year on, we are very satisfied with the performance of our Supertrends, which form an integral part of the Credit Suisse House View. Furthermore, each individual theme remains highly relevant, as you will read in t

5、he pages ahead. We hope you find this update of value for your investment decisions. Michael Strobaek We are pleased to present to you the updated version of Supertrends, the five long-term investment themes we established a year ago as part of the Credit Suisse House View. Global Chief Investment O

6、fficer Credit Suisse Head of Investment Strategy robotics contributing to better quality products, higher safety and less expensive elder care; and healthtech contributing to meaningfully lower health costs. Population aging has become a topic of focus around the world. In a joint study published in

7、 The Lancet, the Imperial College London and the World Health Organization esti- mate that by 2030, life expectancy is set to increase in many developed and emerging countries. In South Korea, children born in 2030 can likely expect to live to over 90 years, an age long considered unattainable. The

8、greater availability of health insurance and better health service coverage, a general focus on civil security, healthier eating and living practices as well as the absence of large-scale armed conflicts have all contributed to increasing life expectancy. At the same time, old age comes with old age

9、 diseases, above all cancer, heart failure, arthritis and forms of dementia. Healthcare companies that focus on these conditions can therefore benefit. Smaller biotechnology companies are currently seeing an uptick in merger and acquisition activity, while larger pharmaceutical companies are the tru

10、e leaders in terms of scale. Beyond healthcare, the elderly will continue to spend their savings on consump- tion and activities tailored to their needs, while the working population expecting to live longer will require pension fund and asset management solutions to build savings available for cons

11、umption once they retire. Meanwhile, the Millennials tide is just at the beginning. People currently under the age of 30 make up half of the population worldwide and are increasingly influencing businesses and the values of global firms. In recent months, a number of media and marketing initiatives

12、have picked up the theme. The Financial Times, for example, introduced a special section on Millennials in its electronic version, reflecting the growing interest in the characteristics of this particular generation. According to Google Trends, web searches on news related to Millennials have double

13、d over the past twelve months, underpinning the increased visibility of this generation. We pride ourselves in having had a finger on the pulse with our Supertrend Millennials values, which has already created value for investors. Of all our Supertrends, infrastructure has been the slowest to take o

14、ff. In 2016, this theme was one of the most compelling investment propositions, but it subsequently slowed despite its undisputed relevance. It is no coinci- dence that the 2018 Buenos Aires G20 Summit lists infrastructure among its three top priorities. The G20 Supertrends. One year on. 13Credit Su

15、isse Supertrends 201812 infrastructure outlook projects a USD 15 trillion investment gap until 2040, which we feel confirms the importance of this long-term investment theme. Once infrastructure spending returns to the fore in the USA and other countries and in light of rising interest rates, the th

16、eme is likely to come back to the spotlight. Thus we retain Infrastructure Closing the gap as one of our five Supertrends. New features and adjustments While all five Supertrends remain fully valid, we are intro- ducing a number of new features and adjustments. In Technology at the service of humans

17、, we introduce blockchain as part of the digitalization sub-theme. In our view, there are a number of beneficial ways to use the blockchain technology. We regard it as an accelerator for digitalization and an opportunity for investors to further diversify into new areas that will benefit from techno

18、logical developments in future. In Infrastructure Closing the gap, we add telecom infrastructure as a fourth sub-theme, as 5G technology is likely to be a catalyst for large investments in the sector. In terms of regional focus, we see additional potential for infrastructure investments in Africa an

19、d Latin America. Accordingly, we add the respective investment opportunities to our picks. Last but not least, environmental, social and governance (ESG) criteria are set to remain a key topic and investment focus for Millennials. We therefore introduce a full ESG overlay to the Millennials values S

20、upertrend, ensuring that all stocks selected score high in this regard. Robust performance amid higher volatility We have generally been very satisfied with the results of our Supertrends. Now that elevated volatility has returned to global equity markets, we remain convinced that active investments

21、 and strategies aimed at creating value through specific selection (alpha strategies) are the right proposition for investors. With around 25 to 40 single stocks per Supertrend, our approach offers a good degree of diversifi- cation. Furthermore, each Supertrends clear thematic focus ensures a meani

22、ngful difference from broader equity market indices. We have also made sure that each Super- trend includes a sensible combination of cyclical and defensive companies. Moreover, diversification and risk management are top priorities in the construction of our Supertrends. The aim is to protect inves

23、tors from idiosyncratic single company events or temporary headwinds in an industry, region or currency. In the indices we built to reflect our five high- conviction themes, each stock has a maximum weighting of only 5%, which differs substantially from weightings based on market capitalization. We

24、further apply a risk- weighted approach based on the historical volatility of individual stocks to allocate specific stock weightings and further reduce the downside risk in the short run. The more volatile financial markets of the last few months proved that this careful approach pays off our indic

25、es have remained robust. As our Supertrends enter their second year since inception, our aim is unchanged: generating a positive absolute return for investors in the long term. Supertrends. One year on. 15Credit Suisse Supertrends 2018 Angry societies Multipolar world When we established our Angry s

26、ocieties Multipolar world Super- trend, we looked at the root causes of sweeping political and economic policy change, among them rising inequality and insecurity. We expected new governments around the world to strengthen their economies through domestic job creation, wage increases and potentially

27、 regulation or taxation of certain sectors or industries. Restoring middle class prosperity in Western economies, investing in security and defense and stimulating domestic private consumption through higher labor market participation would be likely priorities. We also expected emerging markets to

28、take greater interest in their own economic strength, their consumers. A number of these expectations have been met, but there is further to go. 1 1716Credit Suisse Supertrends 20181 Angry societies Multipolar world Global trade skirmishes have grabbed market and media attention since early 2018 and

29、 are far from over. Negotia- tions over NAFTA and between the USA and China are underway and suggest that areas of agreement are actively being sought, which could eventually be very positive for markets. At the same time, in case of unsuccessful negotia- tions, threats of tariffs in specific areas

30、could well turn into reality, creating winners and losers along the way. 1.1 National champions and brands Corporations have been directly affected by these develop- ments. In April, for example, the US Bureau of Industry and Security banned US companies from selling products to ZTE, a Chinese telec

31、om equipment and mobile phone manufacturer, for seven years. The decision was based on ZTE having violated sanctions on Iran and North Korea. The Chinese government itself announced measures including a 25% tariff on US products valued at USD 50 billion after the US threatened to impose tariffs due

32、to unfair Chinese trade practices. These developments are a good example of the tit-for-tat turn trade negotiations can take. In such an environment, national champions major domestic companies with a large domestic workforce and strong regional product demand appear less vulnera- ble. They often be

33、nefit from government support like subsidies for domestic investments or government lobbying, which reduces their vulnerability to protectionist measures such as tariffs. National champions with global, well- respected brands we call them national brands are even more protected thanks to a loyal and

34、 more diversified customer base. 1.2 Security and defense Security remains a key concern for the middle class. In Western countries, the number of terrorist attacks strongly increased in 2017 to 204 compared to 96 in the previous year, according to AON 2018 Risk Maps. Terrorism there- fore remains a

35、 major worry, highlighting the need for physical security measures like ID and access control, man guarding or explosives detection. Support from smart locks and drones Furthermore, the industry is increasingly adopting the use of software solutions. In the consumer segment, for instance, the trend

36、goes toward smart locks like Amazon Key. Smart locks use a lock, a camera and an app to provide access. On the corporate and institutional side, the latest surveillance cameras use deep learning to improve pattern analysis and alert an operator when atypical activity is detected. This enables proact

37、ive prevention instead of having to analyze evidence after the fact. Thanks to further progress on drone technology, drones are increasingly used for perimeter protection, for instance at public events like sports gatherings or open air concerts. At the same time, the more frequent use of drones req

38、uires better drone detection and protection of restricted air space. Yet the number of near-collisions of civil and military aircraft has increased in recent years. Investments in such technol- ogies are often triggered by tougher safety regulations. For example, according to an EU regulation from 2

39、011, airport baggage screening systems must be upgraded by 2020 to protect from a new generation of threats. The importance of cyber security With more and more connected devices, cyber security is becoming pivotal. Equifax, a leading US credit reporting agency, announced last September that hackers

40、 had stolen personal information of 143 million US consumers. The companys share price collapsed by one third within a week. Ransomware such as NotPetya or WannaCry caused tremendous damage in 2017. To illustrate just how costly such attacks are for companies shipping company Maersk reported a negat

41、ive impact of USD 250-350 million on profit after being hit by NotPetya. While ransomware volumes have increased strongly, according to NTT Security, incidents Keywords see end of chapter. 1918Credit Suisse Supertrends 20181 Angry societies Multipolar world have actually been falling thanks to bette

42、r detection and more effective policies. Yet overall, the total cost of responding to cyber-attacks has increased significantly over the last few years, according to Accenture. Eyes on geopolitical risks The geopolitical environment remains fragile and is therefore another area of concern. There are

43、 signs of improvement on the Korean peninsula, where a potential meeting between US President Trump and North Korean leader Kim Jong-un has fueled hopes of a peaceful end to nuclear tensions. Yet, the situation in the Middle East, Syria and even the China Seas remains tense. In addition, given rapid

44、 technological change and interstate strategic competition which has overtaken terrorism as the primary concern for US national security defense spending is set to increase further, for instance in areas such as space, artificial intelligence, cyber or hypersonic technology. 1.3 Emerging market cons

45、umers As the main beneficiaries of globalization, emerging markets (EM) are often assumed to be strongly exposed to interna- tional trade. While this is true for some export-oriented countries like South Korea and Argentina, it is not for the majority of EM countries, whose exports only account for

46、a third or less of GDP. More importantly, EMs have a powerful domestic growth driver: their own consumers. A young population and a rise in middle class earners is a sound basis for sustainable consumption growth. The latest Credit Suisse Emerging Consumer Survey showed that consumer sentiment in EM

47、 is improving in Asian countries such as China, India and Indonesia, which have the most robust end-consumer markets. Positive trends are also visible in commodity-exporting nations such as Brazil and Russia. In parallel, elements of popular frustration have also emerged in some EM countries, with a

48、 possible shift to pop- ulist governments. In this context, domestic consumer sectors and national champions may well take on a strategic importance in these markets as well. The rapidly growing penetration of smartphones opens up a broad range of online activities to EM consumers. Smart- phones not

49、 only provide access to e-commerce platforms, but also serve as digital/mobile wallets. The highest activity can be observed among younger consumers, but we also see a high share of middle-aged consumers in China and India participate. The result is based on the answers from 254 organizations. The question was how much they have spent to deal with cyber-crimes over four consecutive weeks. The answers were validated and annualized. Source Accenture, Ponemon Institute (2017 Cost of Cyber Crime Study) 2013 2014 2015