The challenge facing investors over the past decade has been that, while the 'slug' of capital they have deployed in equities will likely have risen stoutly in value, the bulk gains will probably have come from a small number of shares in a small number of markets.
But with interest rates potentially rising, and the longer-term impacts of the pandemic and of technological change yet to be fully understood, how can a client have an equity exposure that is prepared for the challenges of the future?
Over the past decade, the performance of equities has been driven by the prevailing low bond yield and low-inflation environment, boosting stocks in the consumer durables and technology spheres.
These tend to be concentrated on the US market, which has now grown to account for around 60 percent of total, global, market capitalisation.
In addition to the uncertainties around the 'escape' from the pandemic, and the technological revolution, the policies of governments around the world may also have changed, with higher levels of spending.
Sunil Krishnan, multi-asset investor at Aviva Investors, says that while we cannot be certain higher inflation and growth are coming “there is an increased probability that this is the case.
"It is possible that coordinated monetary and fiscal-policy responses around the world have changed things, and it is possible that one outcome of the pandemic is that globalisation retreats a little bit, in that companies want supply chains that are nearer or that they want multiple supply chains, and that would be inflationary".
While those are just some possible outcomes among many, it is prudent to have part of the equity allocation assigned to profit from this scenario.”
He says that since the summer, he has been slowly increasing the weighting to value-type equities in his portfolios, as “the odds have shifted” towards these being the types of stocks that benefit.
Ben Kumar, senior investment strategist at 7IM, says that just as the nature of economies are changing, so should the way investors think about value.
He says “valuations are things people look at a lot, but they can change very quickly, and sometimes for reasons that are not obvious, such as when the whole market falls for a specific reason, but some of the stocks won’t be impacted by that reason.
"I think the better approach is to look at how accounting needs to change and at how valuation metrics need to change.
"The problem is that the metrics we use today in the market, such as price to earnings, are not suitable for valuing technology companies, which expand in a different way from how industrial companies expand – and so using historic metrics may not be valid.
"Those historic metrics probably make technology companies look more expensive than they are”.
He says clients should try to have a “clear view on what comes next, and invest in that, but also have some exposure to the opposite of that”.
Keith Balmer, multi-asset investor at BMO Asset Management, says with the world in such a state of flux, it may be that even if a client can understand and predict the latest trends, it will be difficult to select the best companies to invest in to capture this growth.