Note: This article was provided courtesy of Iris.xyz.
By Daniel C. Roarty, CFA and James T. Tierny, JR
When the market is fixated on short-term macroeconomic trends, investors should think differently. Look for companies and industries that benefit from distinctive long-term growth trends and that aren’t held hostage by a country’s macroeconomic fortunes.
Economic growth trends are always in the headlines. In recent years, as the US economic recovery has continued at a moderate pace, persistent concerns that a slowdown or recession is imminent have often grabbed investors’ attention and triggered market anxiety. But for active managers, looking at the latest macroeconomic indicators isn’t the best way to search for stocks with sustainable growth potential.
In fact, many industries are forecast to grow at much faster rates than the US economy in the coming years, no matter what the pace of gross domestic product will be (Display). Searching for companies that can benefit from secular growth trends is one of several ways that active investors can capture excess returns over long time horizons.