Capitalizing on Secular Growth Opportunities

Jennison Associates provides insights into key equity themes for 2019 and where they are finding attractive secular growth prospects

February 25, 2019

After a strong start, 2018 ultimately ended in negative territory with the S&P 500 down 4.4%, the MSCI All Country World Index falling 9.4%, and the MSCI Emerging Markets (EM) Index sliding 14.6%. China continued to rattle markets, damaging market confidence in 2018 as already slowing Chinese growth fears amplified due to the unexpected trade war between the U.S. and China. Despite the macro-based fear-driven sentiment which drove the fourth-quarter sell-off, fundamentals haven’t really shifted. The pullback helped bring down valuations and create some buying opportunities, and generally provided a better setup going into 2019.

While equity markets are off to a good start in 2019, worries about nearing the end of the economic cycle will likely continue to dominate the headlines in the year ahead. Concerns over U.S. rates and trade policy combined with slowing global growth prospects will continue to drive more market volatility in 2019. As this heightened risk profile and uncertainty puts downward pressure on equity multiples, equity investors are understandably nervous about expected equity market growth potential in the year ahead and if appealing investment prospects remain.

In its Key Equity Themes for 2019 outlook, Jennison Associates explains why they believe equities still present attractive opportunities for long-term investors. They explain that as late-cycle risks mount, it’s important for investors to limit exposure to companies with cyclical earnings streams in favor of non-cyclical secular growth opportunities in companies which can grow revenues and earnings regardless of market turbulence through strong consumer demand and robust product cycles. Below is a summary of key equity themes Jennison believes will impact equity markets in 2019 and beyond.

The MSCI All Country World Index is a market capitalization-weighted index designed to provide a broad measure of equity market performance throughout the world. The MSCI Emerging Markets Index is a float-adjusted market capitalization index that consists of indices in 23 emerging economies and is designed to measure equity market performance in global emerging markets. The S&P 500 Index is a market-weighted index of 500 of the largest U.S. stocks in a variety of industry sectors. The VIX is a measure of the implied volatility of S&P 500 Index options. Often referred to as a fear gauge, it represents one measure of the market’s expectation of stock market volatility over the next 30-day period. West Texas Intermediate (WTI) crude oil, also known as Texas light sweet, is a grade of crude oil used as a benchmark in oil pricing. An investment cannot be made directly in an index. Past performance is no guarantee of future results.

The views expressed herein are those of Jennison Associates investment professionals at the time the comments were made and may not be reflective of their current opinions and are subject to change without notice. Neither the information contained herein nor any opinion expressed shall be construed to constitute investment advice or an offer to sell or a solicitation to buy any securities mentioned herein. Neither Prudential Financial, its affiliates, nor their licensed sales professionals render tax or legal advice. Clients should consult with their attorney, accountant, and/or tax professional for advice concerning their particular situation.

Certain information in this commentary has been obtained from sources believed to be reliable as of the date presented; however, we cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. The information contained herein is current as of the date of issuance (or such earlier date as referenced herein) and is subject to change without notice. The manager has no obligation to update any or all such information; nor do we make any express or implied warranties or representations as to the completeness or accuracy.

Any projections or forecasts presented herein are subject to change without notice. Actual data will vary and may not be reflected here. Projections and forecasts are subject to high levels of uncertainty. Accordingly, any projections or forecasts should be viewed as merely representative of a broad range of possible outcomes. Projections or forecasts are estimated, based on assumptions, subject to significant revision, and may change materially as economic and market conditions change.

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