There are currently no signs of a definitive settlement in the trade dispute between the US and China. Although, there have at least been rapprochements on the way to the hoped-for solution in this simmering conflict, a resolution of the dispute would be extremely welcome. All the more so as, due to the interdependence of global trade, this dispute cannot be viewed in isolation. The crucial question, however, is why it is so difficult for those involved to reach an agreement. Essentially, it is a matter of where the future power centre lies in the ranks of the leading world economies and who is at the forefront of forward-looking structural trends. Is a change on the horizon?
A neck-and-neck race for technological leadership
In the future, China wants to assume the role of ‘conductor’ on the world stage. Gone are the days when the country was only regarded as an outsourced production site for the West. On the way to the global market leadership to which it aspires, Beijing wants to close the technology gap with Western and US companies with an industrial strategy. Its leadership is pursuing an ambitious master plan "Made in China 2025", which is intended to bring the country to the top. China as the epitome of the highest quality standards. More than two years ago, the Chinese rulers announced that they wanted to transform the country into an artificial intelligence (AI) superpower. Since then, technical progress has been in full swing. Chinese companies operate with a vast amount of data. These data-driven business models hold enormous potential and it is no coincidence that Beijing has taken the lead in the application of AI technologies.
The US, until now home to the world's strongest growth companies with familiar names from Silicon Valley, now sees itself increasingly in a race against the Asian superpower. Although the majority of all world-class patents come from America, which country will be able to claim to be the leading nation in key digital technologies in the future?
The US will not give up its supremacy without a fight. That is why President Trump is completely committed to his "America first" maxim. In keeping with this credo, US national interests must be at the heart of the country’s trade policy. In this context, however, Europe’s role is an unfortunate one. The European economy is being damaged by the trade conflict and the continent runs the risk falling behind in the race for first place.
For investors, this means positioning themselves as globally as possible in terms of portfolio allocation and paying particular attention to future-oriented structural trends. It is precisely in these innovative growth areas with above-average growth potential that increases in value occur. We are in the midst of an economic transformation phase that is producing new winners.
The MainFirst Global Equities Unconstrained Fund, which was launched in October 2018, concentrates specifically on structurally high-growth investment themes and has an annual performance of 21.90 percent (reporting date: 06/12/19). Top positions include corporations such as Amazon, Microsoft and Alibaba. The fund management is committed to a global strategy and pursues an investment philosophy that focuses on the most promising long-term themes with high growth opportunities.
Author: Adrian Daniel, Portfolio Manager for the MainFirst Absolute Return Multi Asset, the MainFirst Global Equities Fund & the MainFirst Global Equities Unconstrained Fund