American Century's chief investment officers
share insights on navigating election year volatility and AI
surprises
KANSAS
CITY, Mo., June 26, 2024 /PRNewswire/ -- In its third
quarter investment outlook, American Century Investments, the
$245 billion* global asset manager,
shares investment strategies for election- and AI-related
surprises. According to American Century, investors can expect
political rhetoric to ramp up, both in the U.S., where both
party conventions will occur this quarter, and across the globe,
which will see head-of-state elections this year in countries
representing 60% of the global economy. Despite any changes these
elections may portend, American Century would not recommend
political prognostication portfolio adjustments.
"Historical data indicates that market volatility tends to pick
up through Election Day but typically decreases afterward[i]," said
Victor Zhang, chief investment
officer of American Century. "The same research also shows that
staying invested throughout the election year has delivered better
results than attempting to maneuver in and out of the market. So,
we wouldn't recommend that investors adjust their portfolios in
anticipation of or in response to the turmoil."
Staying the course despite election twists and turns;
political risk small part of overall investment analysis
One reason moving in and out of the market can do more harm than
good is because of the difficulty of accurately predicting a series
of outcomes: who will win an election, the policies the winner will
be able to put in effect and the impact those policies would have
on business performance.
"India's surprise results
remind us that investors shouldn't bet on election outcomes with
their portfolios. A lot could change between now and November; even
those who correctly guess the outcome would have difficulty
handicapping the policy impacts on individual businesses," said
Zhang. "In the end, the performance of individual companies drives
investment results."
Keith Lee, global growth equity
co-chief investment officer of American Century, explains that
though actively monitoring risk exposure and quantifying political
risks such as the impact of tariffs are important, the most
significant part of the analysis is the individual security.
"We believe the companies we own have the potential to
outperform their competitors because they're strong companies, not
because of political factors. Our North Star is owning good
businesses. We believe such companies — those with strong
competitive positions and strong balance sheets — possess
fundamental business strengths that make them well-positioned to
ride out many risks," writes Lee.
Passive investments may miss AI surprises
The chief investment officers at American Century make the case
to look beyond the biggest, most obvious winners in the AI theme to
under-the-radar smaller cap companies.
"AI is driving earnings growth for small- and mid-sized
companies in developed and emerging markets. Many are businesses
that investors using a passive investment approach might miss,"
said Zhang.
Additionally, Kevin Toney, global
value equity chief investment officer of American Century, points
out that AI may boost the "relatively snoozy" utility sector with a
growing demand for electricity for the first time in decades.
However, utilities may need more transmission capacity and
regulated utilities may be more limited than independent power
producers.
"For now, we think utilities can be an unexpected beneficiary in
the wider frenzy over AI. For the first time in decades, AI may
drive significant new demand for electricity," said Toney. "Other
factors are also driving electricity demand. Electric vehicles will
significantly increase the need for electricity, especially as
demand for them picks up from their current doldrums. The reshoring
of manufacturing and supply chains, such as semiconductor plants
and electric vehicle plants, is also amplifying electricity needs.
But AI leads the surge."
For more investment insights for the third quarter, read the
full American Century investment outlook , with insights
on:
- Global macroeconomic outlook,
- U.S. equity outlook,
- Global equity outlook,
- Global fixed income outlook,
- Multi-asset strategies outlook and
- Sustainable investing trends.
About American Century Investments
American Century Investments is a leading global asset manager
focused on delivering investment results and building long-term
client relationships while supporting breakthrough medical
research. Founded in 1958, American Century Investments' 1,400
employees serve financial professionals, institutions, corporations
and individual investors from offices in Kansas City, Missouri; New York; Los
Angeles; Santa Clara,
California; Portland,
Oregon; London;
Frankfurt, Germany; Hong Kong; and Sydney. Jonathan S.
Thomas is president and chief executive officer, and
Victor Zhang serves as chief
investment officer. Delivering investment results to clients
enables American Century Investments to distribute over 40% of its
dividends to the Stowers Institute for Medical Research, a
500-person, nonprofit basic biomedical research organization. The
Institute owns more than 40% of American Century Investments and
has received dividend payments of more than $2 billion since 2000. For more information about
American Century Investments, visit
www.americancentury.com.
*Assets under supervision as of 5/31/24.
©2024
American Century Proprietary Holdings, Inc. All rights
reserved
References to specific securities are for illustrative purposes
only and are not intended as recommendations to purchase or sell
securities. Opinions and estimates offered constitute our judgment
and, along with other portfolio data, are subject to change without
notice.
International investing involves special risks, such as
political instability and currency fluctuations. Investing in
emerging markets may accentuate these risks.
Historically, small- and/or mid-cap stocks have been more
volatile than the stock of larger, more-established companies.
Smaller companies may have limited resources, product lines and
markets, and their securities may trade less frequently and in more
limited volumes than the securities of larger companies.
Diversification does not assure a profit nor does it protect
against loss of principal.
Generally, as interest rates rise, bond prices fall. The
opposite is true when interest rates decline.
Past performance is no guarantee of future
results. Investment returns will fluctuate and it is
possible to lose money.
The opinions expressed are those of American Century Investments
(or the portfolio manager) and are no guarantee of the future
performance of any American Century Investments' portfolio. This
material has been prepared for educational purposes only. It is not
intended to provide, and should not be relied upon for, investment,
accounting, legal or tax advice.
[i] Data from 11/6/1931 –
11/3/2021. Source: FactSet, U.S. National Archives, Library of
Congress, American Century Investments.
Contact:
Nicole Glenna
(646) 658-7715
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SOURCE American Century Investments