Global Innovators - January Commentary

This is a marketing communication. Please refer to the prospectus, supplement and KID/KIID for the Funds before making any final investment decisions. Past performance does not predict future returns.

In 2024, the Guinness Global Innovators Fund produced a total return of 21.9% (TR in GBP), compared to the MSCI World Net TR Index return of 20.8%, therefore outperforming by 1.1 percentage points. The IA Global Sector returned 12.6%, with the Fund therefore outperforming its peer average by 9.3 percentage points.

Since launch (May 2003) the strategy ranks 2nd out of 90 Funds in the IA Global sector. It has produced a cumulative total return of 1,396.5% compared to the sector average of 556.9% – an outperformance of 839.6 percentage points. Over 10 years, this outperformance is 125.3 percentage points.

2024 proved to be another impressive year for equities. The S&P 500 has now delivered two consecutive years of over 20% return (USD), for the first time since the 1990s. Global equity markets delivered robust returns against a complex backdrop of evolving monetary policy, geopolitical uncertainty, and divergent regional economic performance. Chief among the driving forces was the Federal Reserve’s long-awaited pivot to a rate-cutting cycle, fuelling optimism across equity markets. Meanwhile, excitement around artificial intelligence only heightened, driving technology stocks and particularly the Magnificent 7 stocks to new highs, though cracks began to show as the sustainability of this performance has come under question.

Magnificent 7

The Magnificent 7 stocks: Alphabet, Amazon, Apple. Meta, Microsoft, Nvidia and Tesla have continued to dominate markets this year, leading markets to new highs, with four of the seven names, among the top performers of the MSCI World. Growth in AI, driving investment in infrastructure and cloud development, wider digitization and partly Trump’s election success have all contributed to their strong performance this year.

The market leadership of these companies has also grown, shown on the chart below which tracks the total market caps of these seven stocks, the MSCI World and the MSCI World excluding the Magnificent Seven. Though the year started with a narrower difference in performance, following the AI growth rally into June, the gap widened. The companies ended the year with a large contribution to total MSCI World performance as the stocks were buoyed by Trump’s election success and improving sentiment on growth stocks.

Source: Guinness Global Investors, Bloomberg, as of 31st December 2024

Though the outlook for 2025 offers much uncertainty, market developments over 2024 point to strength, laying stable foundations for the year ahead. Concerns early in the year over hotter inflation, a hard landing scenario and weakening consumer sentiment have largely abated. Inflation has continued to trend towards targeted levels, reports of jobs data have surprised to the upside and GDP growth particularly in the US has held up, which allowed the Federal Reserve to deliver the much-awaited start of the interest rate-cutting cycle. Despite this broad optimism, we are aware that risks remain. Donald Trump’s return to the presidency introduces policy uncertainty, particularly around tariffs, corporate taxes, and energy policies. His proposed tariffs on imports, if implemented aggressively, could elevate inflation and increase volatility in global markets. Focusing on the US equity market, we enter 2025 with elevated valuations as many stocks are trading at a premium to long term averages. This leaves equities vulnerable to external shocks or negative catalysts. In such an environment, we remain grounded in our investment philosophy of finding high quality stocks with exposure to long term secular growth themes as these companies have scope to grow whilst being protected by better fundamental characteristics in terms of margins and balance sheets but also performing well during cyclical upswings. We are confident that the Fund’s focus on high quality growth stocks, underpinned by structural changes stands us in good stead going forward. Our bottom-up approach helps to identify these quality growth companies, whilst also maintaining a valuation discipline. In addition, our equally weighted positions limit over-reliance on any single company. We continue to focus on these key tenets in the Fund and remain confident of this process over the long term.

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