Rathbones’ Coombs and McIntosh-Whyte, 2019 outlook: Ditch the Models

Something has been creeping into our minds over the past few years: in everything from technology, politics and risk to the dynamics of interest rates, the models of yesterday appear to be breaking down.

By 29 November 2018

Something has been creeping into our minds over the past few years: in everything from technology, politics and risk to the dynamics of interest rates, the models of yesterday appear to be breaking down. And that accelerated in 2018. We think it’s time to throw out some outmoded ways of thinking and ensure that flexibility and open-mindedness protects you from the left-field. While our aims are the same, the structure of our portfolios today are very different to how they were three years ago. Rather than equities, bonds and property, we’re now classifying assets as equities and safe havens.

Key asset allocation decisions

  • A preference for equities over bonds, with a focus on growth companies;
  • Continue to build safe haven assets, including S&P 500 put options, gold, cash and diversifiers;
  • Gradually add to government bonds as real yields rise;
  • Maintain exposure to the US, but watch for opportunities in the East

Our key themes for 2019

  1. Life hacking

    We are interested in how increased cyber-risks will affect consumers and the businesses that serve them. This is the great macro risk of the coming decade, in my opinion. Better systems that offer greater protection, both to a business’s operations and the customer details they hold, are imperative. There should be plenty of opportunities to gain through companies that offer these services, such as Amazon, Adobe and the artist formerly known as Google (Alphabet).

  2. 5G: third time lucky?

    2018 was the 5G auction in the UK; the spectrum went for just £1.4 billion. This generation is touted as a truly revolutionary step, one that will lead to the rapid expansion of the internet of things. It could create massive changes in how we use the internet. For instance, some say 5G will make home broadband irrelevant – we’ll run everything from our phones instead. This new world will be years in the making, but it could have profound impacts on our lives and investments.

  3. China does capitalism better than capitalists

    There’s a real entrepreneurial spirit in China that can be seen from youngsters working furiously to better themselves to the massive businesses like Tencent and Alibaba that have risen like shooting stars above the modernised Chinese economy. China has arrived as a major global power. China doesn’t need to rely on corporate skulduggery or questionable practices to succeed. In fact, these old habits are now probably hindering the nation.

  4. The middle is toast

    One thing has been at the top of our mind lately: if you’re not the cheapest or the best, you’re toast. Many incumbent businesses took way too long to adapt to the new world and were punished for it. We invest in several companies that are doing the punishing, but we also own businesses that appear able to see off flash new rivals.

  5. More political meddling

    Politics seems to be having a greater effect on business than it used to. People are angrier and policies are getting more extreme. Apathy is no longer ok – for customers or regulators. All over the world there’s increasing support for protectionism, which is virtually the same thing as interventionism. To protect ourselves against this market ruckus, as well as any tariff-induced consumer price rises, we are holding a good slug of commodities.

  6. Shaping up for a backlash

    In many advanced nations life expectancies have started falling again. This has led to some interesting backlashes. No-one is celebrating how advances in food technology, such as genetic modification and preservatives, have made food cheaper and cut down on waste. People have rebelled by craving local, organic and less uniformly shaped fruit and vegetables. At the same time, people are striving for a very uniform shape for themselves: slim and toned. The number of gym-goers has skyrocketed, especially among the cash-strapped younger generations. Similarly, I’ve found myself pondering whether a similar backlash is coming in social media.

  7. A 90s argument

We think most people in emerging markets think about shopping the same way we think about shopping. And as emerging middle classes grow, the importance of local tastes is starting to rise. Some Western consumer companies have been guilty of running a global culture strategy from HQ in London or New York when they should have been hiring local managers who know what people really want. As middle classes and the number of millionaires swell in developing markets, we think the demand for true luxuries should rise noticeably. As long as they can keep control of their brand, that is.

Read the full report

David Coombs
Fund Manager

Rathbone Multi Asset Portfolio Funds

Will McIntosh-Whyte
Assistant Fund Manager

Rathbone Multi Asset Portfolio Funds


For more information, please contact:

Madhu Kalia
Intermediary PR (UK/Europe)
Rathbone Unit Trust Management
020 7399 0256
07825 596302
madhu.kalia@rathbones.com      Sam Emery
Quill PR
020 7466 5056