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By Jeff Bourke - February 13, 2019
If you poll ten economists about precisely where we are in the economic cycle, you might get 11 answers at the moment. And if the major market volatility we saw in the final months of 2018 is any gauge, it seems many investors are inclined to believe that we’re in the late stages of that cycle.
That potentially bearish tendency can make the job of a growth investor—someone like me—a lot tougher in an environment where consumer staples (things like canned foods, soap and toothpaste) can become the go-to place to allocate money.
That’s where discipline and conviction come into play. As a growth investor, I operate under a certain thesis—and deviating from it isn’t fair to the people who entrust me with their money. Check out my latest video as I explain that idea in more detail, as well as offer a few thoughts on the much talked about—and feared—inverted yield curve.
Looking ahead to 2019, I think it's important to remember where we came from at the end of 2018, where we saw a lot of volatility in the markets, because people were debating where we are in the economic cycle. I don't think we've gotten resolution on that topic.
2018 was an interesting year, because we saw a return of volatility in the markets, something that we hadn't really experienced for a while. I think that is due to the fact that many people are questioning where we are in the economic cycle at this point. A lot of people are saying that we've peaked. A lot of people are saying that we could decelerate. Others are saying that we could actually accelerate. That disagreement among market participants is why we've gotten the choppiness and volatility that we've seen. I actually think that could persist into 2019.
One of the things that’s been in the news recently has been that the yield curve has gotten close to inverting. Why is that important? Well, if you look back over history, there's never been a recession where there wasn't a yield curve inversion that preceded it. That doesn't mean that it happens every time. There’re some false positives that can happen. Whenever the yield curve gets close to inverting, the market gets nervous because of the potential for a recession.
As a growth investor, particularly, what do we do? When most people think about a recession scenario and how they should invest, consumer staples come to mind, because people don't stop buying toothpaste when they're worried about the economy. Well, for a growth investor, that can be difficult. Consumer staples companies typically don't grow very fast over time. If we get caught up in a flight to perceived safety, we can put ourselves at risk of, when growth returns, not being positioned to really participate when we're supposed to. Our philosophy is to stay with our consistent process of looking for high-quality companies that can sustain growth for the long term. That's not something that's going to change with the economic cycle.
Trade war aside, Sr. Portfolio Manager Patricia Ribeiro is still finding opportunities to invest in China. Find out how in her latest quarterly update.
It’s too early for value investors to declare victory, but last quarter’s value rebound has Sr. PM Mike Liss optimistic about these opportunities.
Senior analysts David Byrns and Jessica Raymond discuss how the September attacks on the Saudi oil industry may affect economies and investors.
Sustainable competitive advantages and pricing power are key attributes of companies Portfolio Manager Jeff Bourke seeks in the current economic environment.
Portfolio Manager Jeff Bourke describes how our growth teams are navigating this uncertain environment to find compelling long-term growth opportunities.
February 14, 2019
Growth investing was still in favor during Q3 2018—but to a lesser extent. How would Large Cap Growth VP & Portfolio Manager Jeff Bourke approach a potential value-driven market? He shares three reasons he’s not worried in this quarter’s outlook video.
November 8, 2018
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The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.