We’ve written many times about the difficulty—or as some would say, the futility—of using macro events to predict economic conditions and financial-market performance. That’s why instead we’ve always focused on the prospects for individual companies.

Among macro forecasts, consider the many warnings that artificially low interest rates and massive government-bond purchases (a.k.a., quantitative easing) in the aftermath of the global financial crisis (GFC) would produce runaway inflation. To the contrary, about 10 years later, we now have persistently low inflation—and even deflation in some areas of the global economy.

Moreover, despite predictions for rapidly rising interest rates, the 10-year U.S. Treasury bond yield recently fell to about 2%. Even more surprising, 10-year government-bond rates in Austria, Denmark, Germany, Japan, the Netherlands and Switzerland are actually negative. Just imagine tying up your money for 10 years and actually getting back less than you had originally invested.

Recently, perhaps the only macro force that’s been a reliable harbinger of near-term market performance has been U.S. Federal Reserve (Fed) policy. Stocks seem to be rising and falling based on actual and anticipated adjustments to the federal-funds rate. The Fed’s latest pronouncements have been about an upcoming rate cut and a revised view on neutral monetary conditions. While these pronouncements have been perceived as positive for stocks, paradoxically the Fed’s change of heart has been in response to signs of economic weakness.

The often-irrational reliance on the Fed has been in the short run, and we don’t necessarily expect such behavior by market participants to continue indefinitely. What we do expect is that our approach of concentrating on company fundamentals will continue to add value over the long run. And one element of this approach is our emphasis on innovation—whether in companies creating breakthrough technologies or in companies simply using these technologies to benefit their businesses.


Digitalization, at its most-basic level, is a superior way of doing business. Digitalization involves the electronic storage, retrieval and distribution of information, and the ability to communicate, collaborate and be productive with the help of electronic devices. We see the rapid digitalization in the global economy as the foundation of the innovation occurring at companies in every sector and in every industry.

One key development is the ability of even non-tech companies to establish more-personalized relationships with their customers through the use of mobile-phone apps. In the U.S., many of our portfolio holdings are technology companies that directly facilitate this secular trend or are companies that have embraced technology to gain a competitive advantage in the race to source, convert and retain customers. Companies are increasingly utilizing mobile apps as critical sales tools. Today’s consumers are convenience-driven. Companies, large and small, have been finding that mobile apps help them to better engage with their customers, who are then likely to become more loyal and boost spending.