In this episode, Grayson Witcher, the lead manager of the U.S. Equity Strategy, discusses the key drivers currently impacting the U.S. economy, including inflation, interest rates, artificial intelligence, and the upcoming presidential election. He emphasizes the importance of diversification and avoiding sharp edges—particularly during an election year. Grayson outlines the importance of and reasoning for his team’s practice of monitoring company management changes in real-time and the value of investing in companies with strong leadership.

Key Takeaways:

• The three big themes driving the U.S. market over the past six months are interest rates and inflation, artificial intelligence, and the election.
• While food, energy, and goods inflation has fallen, service inflation is proving to be a bit stickier, as it entails things like car insurance, rent, and medical services. Wage inflation has also remained relatively strong.
• With artificial intelligence, there is no denying the initial hype and surrounding success of the excitement for companies like NVIDIA. However, the question remains as to whether the trend will continue or start to fizzle out, similar to other technology trends from the 90s and 2000s.
• Regarding the upcoming U.S. election, both candidates’ agendas could impact the economy in inflationary ways, though the impacts would differ depending on the prevailing candidate.
• For Grayson, his election strategy for the portfolio is to prepare, not predict. He avoids sharp edges, which are the industries and companies that are highly dependent on one outcome, and leans into diversification.
• Within the U.S. portfolio, there are two main ways the team diversifies the single-country portfolio: diversification by geography and by industry or sub-industry.
• For long-term investors, management and culture drive a significant amount of value because they reinvest the cash flows generated by these businesses, and they are responsible for managing risk.

Host: Andrew Johnson, CFA, Mawer Institutional Portfolio Manager
Guest: Grayson Witcher, CFA, AB, Mawer Portfolio Manager

For more details and full transcript visit: https://www.mawer.com/the-art-of-boring/podcast/the-u-s-equity-landscape-inflation-artificial-intelligence-and-elections-ep166

This episode is available for download anywhere you get your podcasts.
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Founded in 1974, Mawer is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. Visit Mawer at www.mawer.com.

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