Intermede Investment Partners talk equity market environment

Funds Management

by Clive Tompkins

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Intermede Investment Partners, Investment Analyst, James Kim talks about the current state of markets in which global tensions have never been higher. Intermede Investment Partners Limited is the manager for the Intermede Global Equities Fund issued by Antares Capital Partners Ltd ABN 85 066 081 114 AFSL 234483.

Stephen Barbarich:
Today I'm joined by James Kim, co-founder and investment analyst at Intermede Investment Partners. Thanks for your time today, James.

James Kim: Thank you.

Stephen Barbarich: Given some of the recent market volatility that we've seen, what are some of your current thoughts on where we might be in the current market?

James Kim: Absolutely. It's clear that volatility seems to have returned to the market environment. In recent weeks, we've seen a couple fundamental changes that are really driving that. Number one, for the first time in almost 10 years, we've actually seen an interest rate cut by the Central Bank in the U.S. Secondly, we've seen the return of an inversion in the yield curve in the U.S., which often is an early signal for a potential recession coming in the near term. Lastly, we've also seen an escalation of the trade war rhetoric between the U.S. and China, which has introduced a new level of uncertainty into the market place.

Both of these things, a low interest rate environment and the larger trend toward globalization, have been really profound underpinnings or tailwinds to equity market growth over the last 10 years. Now that those two things might be shifting against the economy, as investors, we've been more focused on thinking about how do we protect our portfolio to perform well in potentially downside scenarios where we might enter into a period of a slowing or declining economic growth and that we might see a breakdown in trading around the world, whether that be between the U.S. and China or other parts of the investible universe.

In that regard, we think it's very important for investors to think about making sure that the quality investments that they have in their portfolios, the stocks that they actually select exhibit the right characteristics, which in our mind is attractive growth characteristics that are able to drive growth through market cycles beyond just the immediate risk of a potential down cycle. And two, finding those high-quality businesses which earn returns in excess of their cost of capital. Having that excess exist will allow businesses to weather any storm very effectively and come through a recession with their businesses as strong as ever.

Stephen Barbarich: It's really interesting. Thanks for those insights today, James. Thanks for your time.

James Kim: Thank you.