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Longevity Economy strategy - July 2022

  • 16 September 2022 (5 min read)

Longevity Economy companies reported strong quarterly earnings

  • • Global equity markets rebounded in July
  • • Positive contributions from all our four themes led by “wellness”
  • • We remain focus on long-term changes brought about by ageing populations

What’s happening?

Macroeconomic concerns continue to be the biggest influence on investor sentiment. But with many companies reporting second quarter earnings in July, there was the opportunity for business fundamentals to influence stock performance.

Once again, the top macroeconomic focus of attention was different this month. The macroeconomic flavour of July was the US Federal Reserve Chair suggesting that its policy rate increases may peak at a lower level than the market was anticipating. This caused macro-influenced investors to decide that growth stocks might be more interesting given their recent pullback.

Information technology (IT) stocks were particularly strong during the month, which is perhaps not surprising as many technology companies reported earnings that were in line or better than market expectations. Unlike other long-term secular trends changing consumption patterns, the longevity economy is not significantly exposed to IT stocks. As such, strong performance in IT stocks does not benefit the longevity economy strategy as much as it benefits other thematic strategies.

There some interesting dynamics being exposed in medical technology sector as healthcare systems in many countries continue to recover from disruption caused by COVID-19. Surgical procedure numbers obviously suffered a significant decline during the initial waves of COVID-19 as more resources were allocated to COVID patient care and many people stayed away from hospitals.

Interestingly, surgical volumes haven’t returned to the numbers investors were anticipating. Part of this was exacerbated by the recent China lockdowns, which caused a shortage of contrast agents used in medical imaging and without necessary pre-operative images it wasn’t possible for some elective surgeries to go ahead. Secondly, there remain staffing shortages, particularly in US hospitals, that are limiting the ability to conduct procedures, forcing hospitals to reduce the number of surgeries or use more expensive temporary staffing contracts which reduce margins for for-profit surgery operators. Then there remain significant numbers of COVID cases globally and the need to pre-screen staff and patients for COVID is causing a higher cancelation rate for procedures. It’s an interesting dynamic because it shows the persistence of COVID disruption, but at the same time many analysts and medical technology market commentators are still talking about eventually ‘returning to normal’ and a ‘post-COVID’ environment. Maybe it is time to accept that there is no such thing as post-COVID?

Portfolio positioning and performance

All four themes of the longevity economy strategy contributed positively in July as many companies began reporting second quarter earnings. And while the longevity economy’s lack of exposure to tech stocks meant it didn’t keep pace with the broader market, it still posted very credible positive performance on the month.

Notably, positive performance generally came from companies that reported corporate earnings, suggesting that results in general exceeded market expectations. For example, this was true for many of the US health insurers, such as United Health Group. However, in our senior care theme, US hospital operator, HCA Healthcare still managed to report impressive financial results as it balanced moderate patient demand and increasing staffing costs.

In recent months, there has been some negative momentum in stocks for companies exposed to discretionary consumer spending. Our view of this has been more nuanced, while we see tightening household budgets as a result of rising food and energy prices, there has been clear pent-up demand for services not possible during social distancing restrictions brought on by COVID, for example international travel and other leisure activities. It was gratifying therefore to see American Express reporting positive momentum in consumer spending trends, thereby contributing positively to the longevity strategy. In contrast though, Royal Caribbean Cruise Lines suffered as rival operator, Carnival raised additional financing (and RCL itself raised additional financing after the period under review), suggesting a tightening of operating conditions for some, while others continue to experience robust demand.


Many investors are focused on macroeconomic concerns above everything else at present, but we are cautious of the market’s response to these concerns for a number of reasons. Firstly, the primary economic cause of concern has changed on a monthly basis throughout this year, highlighting the fickleness of markets and the problems of making investment decisions on a macroeconomic basis. Secondly, many of the observed moves in the market seem to follow economic textbook interpretations of what should happen when inflation is X% and/or unemployment is Y%, but there doesn’t seem to be much additional consideration of the lingering effects of a global pandemic. This leads us to conclude markets may remain volatile for some time, but investors may be wrong about how some firms will perform in the current economic environment, creating both risks and opportunities for long-term investors.

The longevity economy strategy is tilted towards growth companies and we expect this to be beneficial over the long-term, but it does mean the strategy could lag the broader market during periods of volatility or when growth stocks are not favoured by investors.

The lingering impact of the COVID-19 pandemic continues to disrupt certain sectors, such as healthcare providers and medical device makers, while benefitting others, such as diagnostic test makers and vaccine developer. We continue to believe in the long-term trends driving healthcare demand (ageing populations and increasing prevalence of lifestyle diseases for example) but in the near term, some companies benefitting from these long-term trends may experience below trend growth.

Despite the market volatility, many companies exposed to the Longevity economy are performing well. Overall, this leaves us with the impression that investors cannot simply dust-off their economics textbooks to draw conclusions on which sectors will prosper in this high inflation environment and there is real value to looking past the macroeconomic concerns to the fundamentals of individual businesses, particularly those exposed to the theme of ageing populations as more baby boomers than ever are reaching the age of 65.

Examples are provided for informational purposes only and  should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalised recommendation to buy or sell securities.

No assurance can be given that the Longevity Economy Strategy will be successful. Investors can lose some or all of their capital invested. The Longevity Economy Strategy is subject to risks including: Equity; Currency; Global Investments; Emerging markets; Investments in small capitalisation universe and Investment in specific asset classes.

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