As we now start to look beyond the hard soft-landing debate, we have been thinking about what thematic trends will define the 2020s. Will nascent breakthroughs like AI and biotech reshape society? Can emerging markets bypass middle-income traps? With so many novel ideas competing for attention, the temptation is to chase the shiniest narratives. Yet history counsels scepticism.

Cast back 10 years and consensus picks then have mostly disappointed — BRICs, commodities, and gold all lagged badly. Go further back and repeated trend extrapolation errors litter the landscape. Japan’s unstoppable rise in 1990 preceded decades of stagnation. Dotcom domination fizzled fast after 2000. Exuberant forecasts detached from how complex adaptive systems actually behave.

Rather than fall prey to the endless rise of recency bias, we take a thematic view only partially rooted in trends. The other key pillar? Value. Combining both lenses allows better navigation of an inherently uncertain future.

Our approach begins by identifying big-picture shifts that will likely occur over longer-term horizons — climate change, aging populations, and technological transformation. Within this frame, we scan for areas where cyclical depression has opened up large discounts to fair value. Hidden corners ripe for mean reversion. Bombed-out asset classes and sectors questionably priced for permanent irrelevance.

Examples today include international value stocks, commodities, Japan, healthcare and deep cyclicals. Across these, positive structural stories remain yet are valued as if only terminal decline lies ahead. This presents opportunity.

We aim to establish positions in these out-of-favour assets while staying diversified and avoiding overconcentration. The valuation cushion provides resilience ahead of the crowd rediscovering these areas. As fundamentals improve with time, scepticism gives way to cyclical tailwinds which compound gains. We then hope that upside momentum will start to run as narratives take hold. Well, that’s the plan anyway.

Right now, part of that discipline means exercising particular caution around US mega tech — an area with positives priced to perfection hitting limits (this week Nvidia beat exportations of stellar earnings and the stock fell). While tech will continue transforming business and lifestyle, dominant platforms now face regulatory threats, wage inflation, supply chain shifts, and competition from new challengers. Reasons for restraint as exuberance spirals.

Hopefully this 'fusion framework’ will afford portfolios resilience. Unlike rigid conviction in any one particular future, we will adapt to regime changes while avoiding story stocks vulnerable to sentiment swings. Rather than pretend point predictions a decade out, our approach stays centered on probabilities and asymmetry. Tilting towards what’s interesting while guarding against what’s important — tracking value spreads to capture inflections. In a messy, complex world the idea is that we can balance some vision with an element of pragmatism.

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