A clear bifurcation in markets between winners and losers exists, especially during this pandemic. Interestingly, after the first quarter results in the USA, despite earnings being negative, there was a strong contrast between companies with strong secular tailwinds and those that are more dependent on the economy.
JPMorgan reported that 24% of S&P 500 companies attained higher revenue growth than their pre-COVID estimates. Further, results show a major separation between Nasdaq 100 companies, which posted an earnings surprise of +2% and revenue growth of +9%, with cyclically sensitive small-caps posting a -29% earnings surprise and -42% revenue growth. The gap between winners and losers is widening as we predicted.
The outperformance of the Tech sector is correlated to it out-investing almost every other market sector (circa 16% of revenue invested into R&D + CAPEX). The rest of the market stands at 8% of revenue; this having been flat for the past decade.
Companies intensely focused on innovation are a key feature across all our Megatrends and thus in the Insync portfolio. We are not reliant on a single sector such as Technology for performance.