Equity markets returned another strong quarter in Q2 with the S&P 500 adding +4.3% and MSCI World +3.2%. One feature of this rally was its concentration within a few select mega cap stocks in the US, creating headwinds for active managers.
At the halfway point of the year, it is helpful to look back at our outlook for 2024. We cautioned investors at the time that broad benchmarks were becoming more akin to stock picks – and this trend has worsened in the first half of the year. The need to diversify away from Mag 7 (which most investors are overallocated to) is important and one way to do this is to shift focus towards areas of the market with uncorrelated structural growth potential.
At the turn of the year we warned investors that consensus expectations were strongly assuming a soft landing, whereas we saw weakening into the second half. The data flow so far corroborates a harder than expected landing, though with the timing of a recession slipping likely into the back end of H2 and even into the start of 2025. The market consensus, however, has not moved. Should investors sell? Timing markets is difficult and we think this is almost always a bad idea – staying invested is important. However, the run up in Mag 7 names does create an opportunity to rebalance and reallocate to areas of the market which reflect non-economic growth drivers that should stay relatively immune – healthcare being a prime example. Finally, as long term investors we are focused on capitalizing on investment opportunities presented by economic weakness.
Tema continues to build as a firm. At the end of the quarter we crossed $200m in AuM, demonstrating our approach towards institutional grade active management is resonating with investors. We often hear from clients that Tema’s differentiated strategies help provide diversification to their portfolios, outstanding fund management expertise and risk management, in a market full of risks.
We also announced the first member of our life science advisory board – Professor Jens Juul Holst – the pioneer of GLP-1. Professor Juul Holst discovered GLP-1, has written nearly 2,000 papers on the topic and help develop Ozempic/Wegovy. We will have more announcements over the months to come as we build out our expert board to help advise on key scientific and medical topics shaping our therapeutic investment areas.