This website uses cookies to collect usage information in order to offer a better browsing experience. By browsing this site or by clicking on the "ACCEPT COOKIES" button you accept our Cookie Policy.

Active Investors Wake Up Before a Revolution


CFA, Head of Equities

The world is waking up the 4th Industrial Revolution, with the impact of Coivd-19 accelerating many changes already underway, says our Head of Equities, Stephen Dover. He opines on how underlying fundamental disruptions in our economy can present opportunities for active investors.

Remember the story of lazy Rip Van Winkle who slept for 20 years, missed the American Revolution, and awakened to a new country? Similarly, the world is waking up to the 4th Industrial Revolution, a time of massive change led by innovation, which the impact of the Covid-19 virus has accelerated. This year will be remembered as a tragic one, with much suffering and many lives lost, and also as a fulcrum for health, economic and social disruptions.

  • Trends that might have happened over the next decade or so are accelerated into 2020. Tele-health, remote learning, working from home, internet retail, and many technological innovations are changing commerce and our ways of living and interacting. We are not going back to “the way it was” pre-Covid-19, especially now that it seems the pandemic will be with us for many more months.
  • Why are the US equity markets near all-time highs? One reason is because massive fiscal and monetary stimuli have put a backstop against corporate and personal insolvency. The downside risk has been reduced. Normally when you have a recession, the US equity markets drop on average around 40%.1
  • Due to tremendous social and economic changes, several notable companies are facing bankruptcy. Many of these “old economy” companies are closing more so because they are being disrupted by innovation, e.g., the “old” retail companies, than because of the economic slowdown. Their demise is primarily related to the acceleration of trends—changes in the way our economy and lives are structured.
  • There are some companies that will not make it through this upheaval and there are others that will forge a new paradigm. We should invest in companies that are innovators in their industries, and equally important, we need to avoid companies that will be disrupted. It could be as important to avoid bad companies as it is to find good companies.
  • Investors might look back on this time as a break from reversion-to-the-mean investing.

Over the next few months, it’s likely headlines will be filled with news on vaccine trials, political uncertainty, a deepening recession and more social unrest. But underlying this are fundamental disruptions in our economy that will impact how we live and work—this also presents opportunities for active investors who are observing the longer-term trends.

1. How Stocks Performed During The Past 6 Recessions” by Mike Patton, Forbes, March 30, 2020.

Originally Posted on August 6, 2020 – Active Investors Wake Up Before a Revolution

Important Legal Information

This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice.

The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as at publication date and may change without notice. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region or market.

Data from third party sources may have been used in the preparation of this material and Franklin Templeton (“FT”) has not independently verified, validated or audited such data. FT accepts no liability whatsoever for any loss arising from use of this information and reliance upon the comments opinions and analyses in the material is at the sole discretion of the user.

Products, services and information may not be available in all jurisdictions and are offered outside the U.S. by other FT affiliates and/or their distributors as local laws and regulation permits. Please consult your own financial professional or Franklin Templeton institutional contact for further information on availability of products and services in your jurisdiction.

Issued in the U.S. by Franklin Templeton Distributors, Inc., One Franklin Parkway, San Mateo, California 94403-1906, (800) DIAL BEN/342-5236,—Franklin Templeton Distributors, Inc. is the principal distributor of Franklin Templeton U.S. registered products, which are not FDIC insured; may lose value; and are not bank guaranteed and are available only in jurisdictions where an offer or solicitation of such products is permitted under applicable laws and regulation.

What Are the Risks?

All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. To the extent a portfolio focuses on particular countries, regions, industries, sectors or types of investment from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a portfolio that invests in a wider variety of countries, regions, industries, sectors or investments. Actively managed strategies could experience losses if the investment manager’s judgment about markets, interest rates or the attractiveness, relative values, liquidity or potential appreciation of particular investments made for a portfolio, proves to be incorrect. There can be no guarantee that an investment manager’s investment techniques or decisions will produce the desired results.

CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

Disclosure: Franklin Templeton

The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. Because market and economic conditions are subject to rapid change, comments, opinions and analyses are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy.

This information is intended for US residents only.

Disclosure: Interactive Brokers

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Franklin Templeton and is being posted with permission from Franklin Templeton. The views expressed in this material are solely those of the author and/or Franklin Templeton and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

trading top