Partner Content by Artemis

Global equities: Negotiating the transition to a ‘new regime’

Jacob de Tusch-Lec, co-manager of the Artemis Global Income Fund

Capital at risk. This content has been prepared for professional investors only. All financial investments involve taking risk which means investors may not get back the amount initially invested.

If you’ve attended one of our presentations or webcasts over the last couple of years, you’ll have heard us explaining why we believe the world is undergoing a process of ‘regime change’ of the type only seen once every few decades. This change is both political and economic. You’ll probably also have seen a version of the table below. In it, we contrast the winners of the decade that followed the global financial crisis with those we think will be the beneficiaries of the next political, economic and financial regime.

Then… Post-GFC winners (2009-20)

Now… Post-pandemic winners (2021-?)

Inequality up

Wages up





P/e dispersion increasing

P/e dispersion narrowing




Capital equipment



Growth stocks

Value stocks




De-globalisation / autarky

Intangible assets

Raw materials

Profitless growth

Dividend yields

‘Just-in-time’ supply chains

‘Just-in-case’ inventories

When we first drew up this table, inflation was not a topic being discussed on the evening news, central banks were more worried about deflation than rising prices and interest rates were being held down rather than pushed up.

In our portfolio, meanwhile, our preference for defence stocks and energy companies over non-dividend-paying software or media companies stood in direct contrast to the majority of global equity funds. Over the preceding decade, many of those funds had become – for rational reasons – increasingly focused on a narrow set of ‘growth’ names in the US. As the p/e multiples being applied to those growth stocks were hitting new highs, the multiples on some of the unfashionable names in our portfolio were moving lower.

And now?

  • Inflation is back at levels last seen in 1970s.
  • By 2022’s halfway point, energy stocks were one of the few areas of the market to be in positive territory for the year to date.
  • As the world became less peaceful, defence stocks have performed well.
  • More broadly, profitable ‘old economy’ stalwarts (Tesco, Berkshire Hathaway) are outperforming loss-making tech-focused equivalents (Ocado, Softbank).
  • Our portfolio is outperforming the wider global market.

Strategically, we believe the direction of travel is clear

Our expectation is that the world described in the left-hand column of our table will continue to give way to the one on the right. That process won’t, however, always be smooth. Markets have a nasty habit of inflicting the maximum degree of pain on the maximum number of people and moments of market or economic stress may cause central banks to hit the panic button. For example, we recently saw a rally in long duration assets as markets believed global central banks had ‘blinked’ and toned down their hawkish rhetoric.

The change we are anticipating, however, is not simply about a short-term shift in in monetary policy or in financial markets. Rather, it will be an enduring, multi-faceted process, one that is reconfiguring the global economy to suit politicians and their unhappy voters, rather than multinational corporations and their shareholders. In purely financial terms, it will mean correcting imbalances that built up over almost a decade of what was, at best, skewed investment into technology and ‘last-mile’ delivery services and, at worst, outright malinvestment.

Malinvestment will take years to work its way through the system

To recap one of the central elements of our thesis, a decade of QE and ZIRP (a zero interest rate policy) resulted in today’s social and political tensions and in capital being misallocated on a massive scale. The policies central bankers used to reassure markets in the decade following the financial crisis produced a huge increase in inequality (the asset-owning rich got richer while wage earners didn’t). That is helping to fuel much of the populism and nationalism we see unfolding today.