The evolving nature of advisers’ client bases, and the work they do for different parts of those, is leading to title creep. But there is little in the way of official guidance on what titles are appropriate.
During the Great Moderation, the mantra was “be long and don’t touch”. But with a wave of transformation sweeping through markets, BlackRock thinks it’s time for investors to switch things up.
The two sectors that ruled the ASX in the last decade
The Australian Stock exchange (ASX) presents a tale of two halves over the preceding decade, with healthcare taking out overall honours on performance charts over the ten-year span, despite a mighty challenge from information technology stocks in the last five years.
The performance of Australian healthcare companies was on the boards well before the pandemic served to put the sector on the priority list. In fact, the Australian healthcare sector’s gains were mostly made before the global health crisis; its roughly 200 per cent rise between mid-2014 and 2019 essentially doubled its nearest competitor (information technology) and has remained relatively stable since.
Several factors play into this outperformance, headed by high spending in the sector from government, private health insurers and private equity. Companies like global hospital provider Ramsay Health Care (ASX:RHC), health-tech and respiratory care provider RedMed (ASX:RMD), implant maker Cochlear (ASX:COH) and the $150 billion blood products provider CSL (ASX:CSL) all recorded significant gains over the period.
Healthcare was the only sector to actually rise during the early days of the pandemic, as investors across the spectrum backed companies jostling to commercialise front and backline support providers. As the pandemic passed, however, the boost tapered off as money companies shifted from spending money on sales to putting it towards clinical trials. And in the post-pandemic era, the sector has stayed at around the same valuation levels.
While healthcare has remained relatively flat in the second half of the previous decade, information technology (IT) has taken off in a big way.
The pandemic, again, played a central role in the ascendancy of a particular sector. As lockdowns took hold and government stimulus packages artificially inflated bank accounts, retail investors spent more time online, with access to cheap brokerage unfettered. Given the nature of the pandemic, with many services shifting online, investing in technology providers and services has seemed like the logical bet for most investors.
Yet the information technology sector’s five year boom wasn’t to be a linear ride. Over 2021 and 2022 global technology stocks fell 30 per cent against a broader market decline of just 20 per cent, as the spectre of higher interest rates, geopolitical tension and uncertain economic conditions pervaded. While Australia was far from the epicentre of technology, it was also not immune to the machinations of market sentiment.
The sector was saved by another mighty tailwind, however, when artificial intelligence took hold in 2023 and chip maker Nvidia became the most valuable company in the world. While on the periphery of the AI maelstrom, Australian technology providers like NextDX, the largest data centre operator in the country, and software provider Wisetech Global have benefitted directly.
Whether healthcare and technology present as a buy for investors at this point likely depends on their specific investment proclivities and overall goals. The future is unlikely to mirror the past, but it does often bear a striking resemblance.
