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Latest partner videos
Three reasons to invest in India
ETF Securities Partner Series: How Morningstar values the US tech sector today
ETF Securities Partner Series: How to Identify a Winning Megatrend
ETF Securities Partner Series: Investment Ideas for 2021
Apr 07, 2021
India may be best known to Australians for its food and cricketers. But the world’s largest country is quickly earning a reputation as a leading investment destination, with one of the best performing share markets in the world. In our discussion, Zach Riaz, Investment Manager for Banyantree Investment Group, goes into bat for India and tells Kanish Chugh why he thinks it is the ultimate emerging market. Prime Minister Modi hits a six India is a country of young people with an exciting future, Mr Riaz explains. And India is set to reap a demographic dividend that in many ways resembles China. This not only includes a strong and vibrant middle class, supported by higher income growth and globalisation. But also greater urbanisation as more people move into the cities. To make matters better still are the policies introduced by Prime Minister Modi. Mr Riaz says: “As the [Modi] reform agenda [washes] through the economy and investments start to come through, then we expect good [economic] numbers. And then all that leads into earnings upgrades. All that leads into... re-rating… and if the earnings line starts to get upgrades and that PE multiple starts coming down.” Why India scores more runs than emerging markets Why invest in India specifically when I can invest in emerging markets? This is a question that Mr Riaz is sometimes asked. For him, the answer is two-fold. First, India has outperformed the broader emerging markets index over the past five years – and by a considerable margin. (At ETF Securities, we have seen this first-hand with our own ETFS-NAM Reliance India Nifty 50 ETF (ASX Code: NDIA), which has outperformed emerging markets the past year). Second, emerging markets indices can be too broad, Mr Riaz feels. This is because they include a vast swathe of countries with little-to-nothing in common such as South Africa, Turkey and Russia. This means using emerging markets ETFs can sometimes be too scattergun or internally contradictory to be useful. He explains: “Our view is looking at emerging markets more from a bottom-up perspective because there's such divergence in the underlying countries. The fiscal, monetary policies and the structural themes behind it, and also the growth profile, the currencies—they all differ.” Will the coronavirus bowl India out? With the supersized population, high-density cities, and weaker healthcare system, some are wondering how India will fare if the coronavirus gets out of hand. Investors have wondered whether economic growth may get derailed. For Mr Riaz, any doomsday scenario is unlikely. However, the risk needs to be monitored. He says: “Generally the economic indicators for India coming out of the recovery has been pretty good. The RBI is pretty accommodative…the currency is holding up pretty well, the current account balance is pretty good as well right now... So I think the near-term risk is really how these new infection rates and cases are handled.”
Mar 03, 2021
Finding value in technology Technology investments have seen extraordinary growth over the past decade fuelled by trends such as virtual connectivity and ecommerce. With many technology company valuations at highs, investors may wonder whether this sector still represents opportunity and value in the coming year. Kanish Chugh, Head of Distribution, spoke to Brian Colello, Director of Technology, Equity Research for Morningstar Research Services on the outlook for technology and how Morningstar identifies value in technology companies. Morningstar is the index provider for the ETFS Morningstar Global Technology ETF (ASX Code: TECH). What classifies as a technology company? For many investors, companies like Amazon or Facebook are often front of mind when they consider technology. While these companies have a heavy technology association to their products and services, they are not strictly classified as technology companies. Morningstar defines the technology sector as companies which generate their revenue primarily from hardware, software and IT services. Some examples of this include Microsoft, with a product base spanning computer software, electronics, personal computers and related services such as cloud and databases, or semi-conductor company Intel Corporation, with a product base covering technology accelerators, boards and systems, connectivity devices, processors, memory and storage. Trends in technology The COVID-19 pandemic accelerated activity in the technology sector. While the vaccine news created some recent volatility, the prospects for this sector exist far beyond the pandemic. The outlook for technology is driven by a range of key trends. Mr Colello says, “The biggest one is still cloud computing, so renting out IT capacity in the cloud rather than building it out yourself by buying routers and servers and storage equipment. That’s been the big driver behind Microsoft with Azure.” Other areas offering ongoing growth include big data and analytics, subscription-based software services, artificial intelligence, the internet of things and 5G. In addition to this, “cybersecurity continues to be a focus, especially as people work more remotely and can access networks and software from different devices and in different ways,” he says. Identifying and valuing technology While technology is typically viewed as a growth sector, there’s no question that different parts of the industry may hold different roles in a portfolio. Mr Colello says, “tech might be all things to all investors. In some spots, we think its safety, so names like Microsoft, Adobe, wide-moat software names have been relatively less volatile in COVID than spaces like airlines. In other spots, there’s growth from the COVID trend so names like Zoom, Docusign, following the remote working, work from anywhere trend. In other areas, there’s fundamental growth that’s still growing and will happen whether there’s COVID growth or not. Those are names like Snowflake, Coupa Software, some of the cybersecurity names.” In identifying technology investments, Morningstar are conscious of company valuations and longer-term prospects, with a propriety methodology called the Economic Moat Rating as part of their research process. An Economic Moat refers to the sustainable competitive advantages a company might possess and comes from multiple areas. Mr Colello says, “there’s typically three sources that we identify. The first is switching costs, the stickiness of a business where it is unlikely that customers will switch away from a product or piece of software towards something else. We see this in software all the time. There’s time, effort and financial costs to switch from one software provider to another. There’s always downtime when you switch. There’s a risk of losing or disrupting mission critical data and there’s a learning curve for all the users and anyone who has used the software.” He provides the examples of Salesforce and ServiceNow as companies which have high switching costs and ‘sticky’ customer base. “The second is network effects, where the addition of another member makes the service more valuable for both existing and prospective members,” he says. You may typically see network effects in marketplaces and social media. An example of the network effect in practice is the Google search bar where more queries result in algorithm improvements and in turn, better future results which encourage people to return. “The third is intangible assets. It could be patents or brands, but more often in technology, there’s workarounds so it’s really design expertise and reputation for quality and reliability. We see this a lot in semi-conductor businesses,” says Mr Colello. Price valuations are mixed in technology. Mr Colello views some companies as being overvalued, in some cases by up to 14%. Some examples of companies which he believes may see some pullback are Zoom or Docusign. However, there are also several mature companies which are simply trading at fair value, such as Microsoft. Morningstar’s view on price valuations is informed by its estimate of a company’s future revenue stream compared to its present market pricing. This is used as a screen in many of their indices to include or exclude companies. TECH, for example, selects those companies identified as trading close to fair value or below. Using technology in a portfolio Investors can use technology in a range of ways within their portfolios. Typically, many investors will already have technology to an extent within their investments as a standard sector exposure offering diversification. It is worthwhile considering global technology though as the Australian technology sector is very concentrated and investors may be missing the variation available internationally. Technology can also be used as a thematic investment for exposure to trends driving our world, or to express views (long and short-term) on the direction of the sector.
Feb 17, 2021
Investing in the major socioeconomic, environmental, and technological themes of our times is becoming more accessible than ever, but how do investors sift through the fads to find the megatrends? Kanish Chugh, Head of Distribution, spoke to James Whelan, Investment Manager for VFS Group (learn more about James here) on his views of the major trends in 2021 and how to identify them for your portfolio. Thematic investing and megatrends Investing in megatrends is a type of thematic investing. It involves considering long-term macro trends, such as robotics and automation, and using various screens and information sources to identify the companies or assets which support this trend through infrastructure or services. Thematic investing is sometimes confused with sector investing. While it’s easy to see how this can happen, thematic investing is more tailored and can span several sectors or even asset classes. To illustrate this, consider the growth trend for technology. While one way to incorporate this might be simply including a sector investment to information technology, a thematic investment might also consider companies outside of this sector classification that also stand to benefit by providing services associated with technology, such as Amazon or Netflix. Thematic investing has increased in popularity over time due to greater access and grew in popularity in 2020 as investors sought investments tapping into the COVID-era, with exchange traded funds (ETFs) a particular beneficiary of this interest. There are some indications this growth will continue and 2021 will be the year of the thematic investment. Mr Whelan says, “there has never been a better time, or a time that has been more accessible for regular retail clients, regular mums and dads at home, or people just on the computer at home, to gain access to those ETFs, and those themes and those areas that they want. Whereas before, you would have had to try and pick out the stocks. There are now ready-made packages for you that you can look at and actually start to pick apart to do the homework for you.” Megatrend or fad? The abundance of often conflicting media describing trends or opportunities can make it difficult to identify whether something is a fad or a long-term growth pattern. Mr Whelan identifies a megatrend using two particular indicators: demographic shifts and government support. “If there is a big demographic shift that's going in, for example, Southeast Asia, the growth in China and Southeast Asia of people moving into the middle class, that's something that's been talked about for ages. What do they eat? What changes do they make? What do they buy? What do they like to do on holiday? All of those things, that's a huge demographic shift… Government stuff. Once the government starts spending money on something, if you're in front of that wave, that's a bottomless pit of money,” he says. Another example of a demographic shift accompanied by government activity is increasing environmental awareness and movement towards clean energy and electric vehicles. Alongside this, government activity on this front has recently ramped up, with local examples being the Victorian Government’s plans to build a new battery storage facility or the NSW Government’s Renewable Energy Pipeline. Investors have a range of options for accessing this, from direct company shares in battery companies to funds such as ETFS Battery Tech & Lithium ETF (ASX Code: ACDC) which collates across the supply chain. By contrast, he views fads as activities with less substance, more noise behind them. “If everybody's talking about it on Twitter and everybody wants a piece of it…Then I think it's a bit of a fad, and I'll have a bit of a look into it. When it’s not a fad is when there’s actually regulation,” Mr Whelan says. He notes that fads can become trends down the track but views government regulation as the key turning point for that. For example, medicinal marijuana stocks spiked a few years ago without accompanying supportive legislation in Canada or any other country and he is wary of investing in this area without the government backing. Trends in 2021 After an unusual and challenging 2020, this year has started with hope as a result of vaccine rollouts and signs of economic recovery. Mr Whelan sees a few trends for the next year. Firstly, small capitalisation companies have shown significant growth in recent times and he views this as backed by economic activity. Mr Whelan says, “after the Biden Government's $1.9 trillion spending budget goes through, we're going to see the US consumer is going to have $2 trillion worth of excess capacity to spend on things, that is absolutely great for small caps and that's going to be very, very bullish for that area.” Economic recovery also brings the prospect of inflation, an area Mr Whelan selects as his second theme. The final theme is more technical and is based on a predicted shortage of a very specific item – semi-conductors. “There is a semiconductor shortage in the world at the moment. Huawei were hoarding semiconductors, before they all got cut off. Electric vehicles now need how many semiconductors? 40% of the cost of a modern car is put on computers. Computers need semiconductors. You've had car manufacturers have to shut down production because they literally cannot get semiconductors just in time because they've been running on just-in-time. When there's a shortage, prices go up. When prices go up, you find a way to meet it,” says Mr Whelan. Rather than investing in individual companies, Mr Whelan has found using ETFs useful for this particular trend as it is difficult to predict which companies will best rise to the circumstances. He cites the ETFS Morningstar Global Technology ETF (ASX Code: TECH) as offering suitable exposure to semiconductors, along with other key technology components. When to move on from the trend Just as it’s important to know whether something is a trend worthy of investment, it can also be important to know when to no longer invest. This comes down to a simple rule for all forms of investment in a portfolio, not just thematic investments. Mr Whelan says, “if the underlying reason as to why you bought it has changed, then you don’t need to be in it anymore. That’s the simple enough reason to be in and out of anything.”
Dec 23, 2020
India is tipped for extraordinary growth in coming years, reaching GDP of $US9 trillion by 2030 and overtaking the US as the second largest economy in the world by 2050. Even today, the value of the National Stock Exchange of India (NSE) exceeds the Australian market. The 50 largest blue-chip Indian companies as ranked by the NSE Nifty50 Index are valued at $A1825bn, representing approximately 60% of the market capitalisation of India. While Australian investors may be unfamiliar with India’s largest companies, many of these are not only dominant globally but supporting future growth in India. Kanish Chugh, Head of Distribution for ETF Securities, spoke to Kinjal Desai, Overseas Fund Manager – Equities for Nippon Life India Asset Management about five of the largest listings in the NSE Nifty50 Index and how they are driving India’s rise. The ETFS Reliance India Nifty 50 ETF (ASX code: NDIA) tracks the NSE Nifty50 Index, offering Australian investors exposure to the India economy. Servicing India and the world Some of India’s top companies exceed the entire S&P/ASX 200 in market capitalisation and may have a greater role in driving global growth, in addition to the Indian economy, than Australian investors realise. We explore five of these companies below. 1) Reliance Industries (11.1% weight in ETFS Reliance India Nifty 50 ETF as at 21st Dec 2020) Ms Desai says, “It is the largest private sector enterprise, started in the oil and gas segment with exploration and production and now its actually moved onto retail (consumer electrics, fashion and groceries) and telecom services. Reliance actually has the single largest complex refinery in the world.” It has been working aggressively to expand its consumer activity. On the telecommunications side, it offered users free internet calling for one year and invested heavily in data services and capacity which has driven it to more than 30% market share in the mobile space. On the retail side, it has recently purchased Future Group – the first to launch hyper stores in India – and its Whatsapp grocery order system called JioMart increased in popularity during lockdown. 2) Hindustan Unilever (3.56% weight in ETFS Reliance India Nifty 50 ETF as at 21st Dec 2020) The largest consumer staples company in India, it has direct coverage of 3.5 million outlets and around 88 million consumers within India. Ms Desai says, “Unilever have a 62% stake in Hindustan Unilever and it contributes about 10% to Unilever’s global sales. Premiumisation has been a very big story for this company and they have effectively done this across all their segments. One example has been laundry detergent. They have successfully created a pyramid of their own portfolio across different price points where even the most premium product is at an affordable price point allowing penetration even in rural areas. About 60% of India’s consumption takes place in the rural areas.” 3) Maruti Suzuki (1.72% weight in ETFS Reliance India Nifty 50 ETF as at 21st Dec 2020) Maruti Suzuki is the largest passenger car company in India and has 50% domestic market share. The COVID-19 pandemic has supported increased interest in personal vehicle ownership, with 57% of Indian consumers considering purchasing a car in 2020 compared to the global average of 35%. “It is a subsidiary of Suzuki Motor Corporation of Japan. It owns a 56% share. They are able to produce 1.6 million vehicles per annum. In addition to this Suzuki actually put up a dedicated plant in Gujarat as well. Overall, the penetration in India for individual vehicles is quite low. It’s expected to reach anywhere between 27 to 30%,” says Ms Desai. 4) Infosys (7.45% weight in ETFS Reliance India Nifty 50 ETF as at 21st Dec 2020) Infosys, India’s second largest provider of consulting and IT services across the globe with a staff headcount of more than 240,000 in nearly 50 countries. Infosys’ proprietary software Finacle is considered an industry-leading program and used globally. “It is one of the fastest growing IT service organisations globally and a leader in the offshore service space. The US and Europe actually make up almost 85% of their revenue. Finacle is used by leading banks in India, the Middle-East, Africa and Europe. Infosys has been increasing local hiring over the past two to three years. It gives them a bit of an edge in the market. The company has changed its tactical allocation policies and that means they will be returning almost 85% of the free cashflow back to shareholders in the form of dividends and buybacks,” says Ms Desai. 5) HDFC bank (10.49% weight in ETFS Reliance India Nifty 50 ETF as at 21st Dec 2020) HDFC is the largest private sector bank in the country – noting that 60% of the Indian financial system is in the private sector). HDFC is focused on customer acquisition across channels, including digital with an emphasis on low-risk, short-duration working capital lending. Ms Desai says, “they’ve seen almost 15-20% CAGR over the past 10 years. They have been enhancing brand productivity and going into rural semi-urban populations and targeting the top 20-25% of that area. They’ve been creating a virtual relationship management strategy and targeting automation. They are currently servicing about 6 million people but are targeting 25-30 million customers through this.” How to invest in Indian companies It can be difficult for investors to directly access the Indian market for listed shares. From this perspective, investors could consider other options such as: - Direct investment in companies with business operations in India listed in Australia or internationally. - Actively or passively managed funds which focus on Asia, themes relevant to Asia or India or specifically focus on India. ETFS Reliance India Nifty 50 ETF (ASX code: NDIA) is the only fund in Australia that offers exposure to the Indian economy via its benchmark index, the NSE Nifty50 Index. NDIA includes exposure to the 50 largest and most liquid companies listed on the National Stock Exchange of India (NSE) and represents more than 60% of the market capitalisation of India. References  https://www.cbre.com/research-and-reports/India-2030---Exploring-the-future  https://www.pwc.com/gx/en/issues/economy/the-world-in-2050.html  Source: Morningstar; Bloomberg; ETF Securities. Data as at 30 October 2020.  https://www.bloombergquint.com/business/jio-becomes-first-telco-to-cross-40-crore-subscribers-mark-trai-data  https://www.moneycontrol.com/news/business/reliance-retail-future-group-deal-how-will-it-benefit-rils-consumer-facing-businesses 5770431.html#:~:text=Reliance%20Retail%20is%20by%20far%20the%20largest%20retailer,chief%20executive%20of%20retail%20consultancy%20firm%20Third%20Eyesight  https://www.brand-experts.com/brand-best-practice/covid-19-impact-reliance-industries/  https://www.hul.co.in/investor-relations/  https://timesofindia.indiatimes.com/auto/news/maruti-suzukis-mpv-market-share-touches-50-as-xl6-completes-a-year/articleshow/77714792.cms  https://auto.economictimes.indiatimes.com/news/passenger-vehicle/cars/almost-57-indian-consumers-willing-to-purchase-cars-in-2020-survey/75672140  https://www.infosys.com/about.html  https://www.edgeverve.com/finacle/australia/
Dec 08, 2020
As an unusual and challenging year draws to a close, many investors may wonder what’s in store for 2021. The prospect of vaccines, a return to travel, and a more ‘normal’ life has given hope to a better year in terms of personal lives and has interesting implications for investing. Kanish Chugh, Head of Distribution for ETF Securities, spoke to James Gerrish, Senior Investment Adviser for Shaw and Partners and author of the investment newsletter, Market Matters, about the trends leading into the new year. Growth was the theme for 2020 In a year dominated by pandemic and bushfires, growth stocks were the key focus for investors, with many traditional value investments hit hard by lockdowns. “Growth stocks are dominated by IT names. They've benefited from lockdowns, they've benefited from more movement online, etc, and they've also benefited a lot over the last couple of years with declining interest rates,” says Mr Gerrish. The technology trend had already been playing out for some years, but the COVID-19 pandemic accelerated adoption as millions around the world were forced to switch their work and life needs to a virtual format. The FAANG stocks formed part of this surge in interest, with Australian investors using a range of entry points, such as the ETFS FANG+ ETF (ASX Code: FANG), to access the growth potential. While such stocks will continue to play an important role in portfolios going forward, Mr Gerrish believes that the outlook may be promising for values-based sectors in 2021. A return to value in 2021 Mr Gerrish says, “in Australia, we had the value index up around 17% in the month of November. The growth index in Australia was up around 5%. There's a huge rotation out of growth, into value in a relative standpoint.” He views this as an ongoing trend and expects value investments to outperform growth investments across the next year but warns against skewing portfolios too far away from growth given the longer-term trends and prospects involved. The reason for this movement towards value comes down to a favourable environment for such investments, assuming a vaccine comes into play in the new year. “We've got really supportive monetary policy around the world, so interest rates are at record lows, liquidity is high, we've got a growing support being provided by fiscal measures in Australia. We're going to be spending on infrastructure, that's going to be a theme around the globe. I think the market is in a really strong spot and could really surprise investors on the upside next year”, says Mr Gerrish. The sectors he views as particularly benefiting from this include financials, infrastructure and resources. He says, “the environment for banks is improving significantly. The loan growth is starting to come to fruition in the bank. We've seen a change in lending standards, which are supportive of loan growth. The long end of the yield curve is steepening, which is positive for bank margins. I think building stocks would do particularly well. I think there's been an underspend on new mine development over the last couple of years. And we're starting to see that through higher commodity prices. So, I think there's going to be some make-up there. If I think about resources, some of the lithium producers in the Australian market are really starting to show some form. The space is more mature now and we’re starting to see more sustainable capital go into that area of the market.” He notes the ETFS Battery Tech and Lithium ETF (ASX Code: ACDC) offers exposure to lithium miners as well as offering thematic exposure to renewable energy, a theme set to continue once US President Biden is inaugurated, given his vocal commitment to sustainable energy. In addition to value sectors, Mr Gerrish still views gold as an important investment in 2021, despite the drop in prices. He says, “I think we're going to have that concept of negative real rates for the next five years at least. Inflation running above interest rates is really supportive of physical assets like gold. There's one fund manager I met last week who rightly pointed out he can't print more gold. So he can print money, you can create cryptocurrencies and the like, but he can't print more gold. We're in the market today increasing our gold exposure.” Interested in using gold in your portfolio? Find out about ETFS Physical Gold (ASX Code: GOLD). A promising outlook for Australia? From an Australian perspective, the return to value and likely sectors to benefit could be supportive of the domestic market. “Our index has got banks and resources, which makes up about 40% of the index, whereas banks and resources make up about 15% of the S&P 500. So that's more skewed towards growth. I think it sets it up for a really high chance of Australia outperforming over the next 12, 18 months or so,” says Mr Gerrish. Interested in incorporating Australian investments in your portfolio? Find out more about ETFS S&P/ASX 300 High Yield Plus ETF (ASX Code: ZYAU). While positive on Australia’s outlook, he is conscious of potential risks, with two in particular concerning him. The first is interest rates. “Over time, they will be increasing interest rates. We've got an environment where investors have got used to record low interest rates. So there will be a tipping point.” The second is maintaining a close watch over the relationship between Australia and China. “It's deteriorated pretty markedly over the last couple of weeks. If that was to turn towards more of our important exports to China, iron ore namely, that could be a real risk for Australia. So, you know, I painted a really bullish scenario at the start of this discussion. The China relationship with Australia is probably one of those left field events that could bubble away in 2021,” he says.
Oct 28, 2020
The dominance of the U.S. over global markets has long meant that its Federal Elections also influence investment activity on an international scale. The 2016 results may have caused global surprise and changed the political sphere, but will the 2020 election cause similar upset? Kanish Chugh, Head of Distribution for ETF Securities, spoke to Timothy Rocks, CIO for Evans and Partners, and David Lane, Director and Senior Adviser for Pitcher Partners about the upcoming U.S. election and how it will impact Australian investors. Market activity and US election results Traditionally, the lead-up to and the period immediately following a U.S. election can cause some uncertainty in markets. This year has been a bit different. Mr Lane says, “when you historically look at markets reacting to U.S. elections, in most periods you actually find that the volatility of markets increases for the three months prior to the election. That hasn't actually been the case this year. We had so much volatility earlier in the year that last few months have been relatively modest in terms of volatility. So, you know, we can't necessarily always predict what's going to happen based on history, when history isn't necessarily repeating itself.” There are still some predictions to be made based on traditional views of parties as well as the policies each party has announced. Mr Lane says, “if Biden gets in and there is a blue wave*, there’s the potential that we could see a bit of a market sell-off on the basis that historically Democrats have not been as positive for equity markets. A number of the policies that Biden has is to increase company taxes and potentially have greater spending on healthcare.” On the reverse though, he notes that there is some suggestion that any COVID-related stimulus package offered by the Democrats could be larger than any offered by the Republicans which could actually be a positive for equity markets. As a whole, Mr Lane says, “I do think that the underlying economic environment, and COVID probably has a bigger impact on the outlook for markets than the actual result of the election itself.” Mr Rocks agrees but also underlines that the circumstances are far from normal. He says, “you could certainly argue that a Biden presidency would be a return to predictability in policy and general relations. I certainly agree that the blue sweep has the potential to give it more stimulus, not just in the short term, but also over the full administration if he enacts a lot of his infrastructures type sort of plans.” A Biden presidency could also play into one of the global themes, growth in Asian markets. Mr Lane says, “one of the geographies that we're looking at from an investment perspective is more Asia and moving money more into Asia on the basis that the Asian economies have come out of COVID quite well, compared to the rest of the world. And potentially if we do have a Biden victory, they may well be, or he may well be more amenable to negotiating a trade with China and the rest of Asia. So, you know, we could see a bit of a positive skew towards Asia into the future.” Predicting the outcome The polls to date have indicated that the Democrats, led by Joe Biden, are likely to have the lead. Whether the data can be trusted is a different question. The polls in 2016 predicted a decisive win to the Democrats under Hillary Clinton and were wrong but Mr Rocks believes analysis has been done to correct the problems of the past. Mr Rocks says, “the pollsters all determined that the real problem was that they were talking to not enough of the right people. In other words, that education plays a big role in voter preference, and that whether you live in a city, suburbs, or rural area played a big role. And so, they were underestimating those key demographics when they were talking to people, so they've made those adjustments now. They tried those new models out in the 2018 midterm elections, and they seem to work pretty well.” He views voter turnout as being the bigger uncertainty this year, citing a combination of greater interest as well as improved access to voting. “Previously there were significant constraints on pre-election day voting, on absentee voting, on mail-in voting, and now all states have allowed some combination of those and made it much, much easier. So as a result, you've seen this thing that 25% of people have already voted at this stage, two weeks out. That could be 50% or more, the way things are going,” says Mr Rocks. Positioning a portfolio during the US election Both Mr Lane and Mr Rocks believe that investors should hold to their long-term strategy, but the environment may open some opportunities for tactical movement. “I think this genuinely is a time that we should be defensive in our portfolios. I think we are more uncertain about the 3-5 year story for markets than we've ever been. You know, health crisis, what happens with vaccine, the macro. So, absolutely this is a time where you should maintain healthy levels of defensive assets, including cash and gold,” says Mr Rocks. Interested in investing in gold? Learn more. From a tactical perspective, both see healthcare as potentially benefitting from a Democrat victory. “Healthcare is that the one sector that will probably have the biggest impact. It is a sector that strangely enough has probably underperformed over the last six months in spite of everything that's been going on around the world, and the general increase in government spending towards healthcare. We still see overall the sector as being good value, but there's the potential of a short-term impact,” says Mr Lane. Considering an investment in healthcare? Find out more. According to Mr Rocks, banking and finance may also be a sector to watch as the Democratic platform has traditionally been focused in favour of regulation, with the Republicans in favour of deregulation, though neither party has promised anything either way. The technology sector may also be in the spotlight in coming months. He says, “there's lots of discussion about whether the big tech titans will be subject to increase privacy rules or antitrust campaigns. But having said that it's not clear whether the Democrats or the Republicans will be worse on that. In fact, the Republicans just announced an antitrust campaign, a suit against Google just last night. So the tech sector is probably in focus, regardless of the result, though.” An eye to the future? For both Mr Lane and Mr Rocks, the U.S. Election is something to monitor for Australian investors, but not necessarily something of particular concern. “The outcome will have some impact, but given what we've experienced over the last 12 months, there are so many other issues at play that really the U.S. election is only one of the many things that we need to be keeping an eye on,” says Mr Lane. Following in this vein, Mr Rocks says, “we really don't know how severe the health crisis will be, how long dated it will be, how successful vaccines will be, whether the macro environment will be able to continue to be relatively resilient to it. What will policy makers do? All these things are much more fundamental questions, when we think about how equity markets will perform over the next sort of three to five years.”