When political uncertainty reigns supreme, it’s important to focus on the few areas of clarity we can find. That means looking at the hard numbers – the performance of businesses themselves. The key is backing high-quality companies with solid fundamentals that have demonstrated their ability to generate consistent profitability over the years and reinvest their earnings for future growth.
Right now, adopting a more defensive stance makes sense, favouring sectors like consumer staples and healthcare – industries that tend to weather economic storms better than most. When it comes to tech many are worried we’re facing a repeat of the dot-com crash of 2000. But today’s tech giants are far from speculative bets; they’re raking in real profits. That’s why recent valuation dips in the tech sector could actually be an opportunity for long-term investors.
Of course, one thing remains beyond everyone’s control: the unpredictable social-media posts of the President. However, a thorough analysis of the data can identify which companies are best positioned to withstand external shocks such as tariffs. Take the so-called ‘Magnificent Seven’ for example. Service-oriented giants like Amazon and Microsoft rather than Tesla or Apple, are less exposed to potential tariff pain. But let’s not get too gloomy. Unless Britain somehow pulls an OpenAI-style tech miracle out of its hat, or new European champions appear, the next wave of innovation is likely to come from America. That’s why it’s critical to stay selective yet forward-thinking, identifying not only the companies that will always be present, but also those that will reshape our lifestyles and workplaces in the coming years.
What markets hate most is uncertainty – and there’s plenty of it right now. Recent sell-offs began as knee-jerk reactions to negative sentiment but have since been compounded by weakening economic fundamentals. With a non-negligible risk of recession looming in the US and potentially beyond, it pays to hold onto profitable companies with stable outlooks rather than cyclical businesses vulnerable to downturns.
The bottom line? In a time of political unpredictability, stay focused on predictable profit streams. While volatility may dominate headlines, long-term investors know this is no time for panic. By staying focused on fundamentals and backing businesses with resilience and vision, you can ride out the storm – and maybe even come out ahead when calmer seas return.
By Obe Ejikeme, co-portfolio manager of FP Carmignac Global Equity Compounders
