A Different Market Era

Last year, we wrote about the likelihood that we were approaching some boundary conditions that were likely to influence economic conditions, market returns and correlations. Since then, it has become increasingly clear to us that a number of these boundaries have indeed been reached, and that financial-market participants need to face up to a very different regime.

What’s in the Paper?

In this paper, Newton’s CEO Euan Munro discusses several key developments and structural trends that are influencing economies and are helping to create market conditions that are very different from those of the recent past. In this context, he explains why he believes that careful, active management can be particularly valuable, and explores where to look for investment opportunities.


Inflation is now higher than many of us have seen in our working lifetimes, and central banks have aggressively raised interest rates in an attempt to contain it.

Beyond the purely financial sphere, frictions between superpowers have been rising, and Western economies have demonstrated greater concern for national self-interest. Climate change and decarbonization efforts are likely to affect the nature of future growth, while China, whose influence on the global economic outlook has become increasingly important in recent decades, is expected to see a continued shift away from manufacturing towards consumption.

After experiencing a rerating of assets in a disinflationary world for many years, we are now witnessing a derating of asset prices in an inflationary environment. Many investors may be hoping that their current portfolio will lead them out of the downturn, but a look back at previous cycles suggests that market leadership can change dramatically in such instances.

Such an environment could be ripe for investment managers offering highly active portfolios, with the scope to carry out in-depth research into individual securities and the ability to access idiosyncratic ideas.