Consumer trends amid rising inflation

The beginning of 2022 was especially bad for growth stocks due to high inflation, elevated valuations, and rising interest rates. While recession fears have wreaked havoc on the global stock markets, Robeco says that growth stocks are now doing better.

The investment management firm in its recent report on Global Consumer Trends talks about the recent market movements relative to the rise of retail investors. Robeco says a lot of money was pumped into the market for hefty returns, but investors quickly retreated as the market entered bear territory.

The firm says that growth stocks bore the brunt of these losses as they generally trade at premium multiples of current earnings, while also being vulnerable to rising interest rates that impact future profits.

Robeco takes into consideration certain growth stocks serving consumers directly and notes that all of them gave double-digit negative returns in the past year. However, the investment management firm says that high-margin companies are better positioned to offset higher levels of inflation. Additionally, the earnings growth of these companies has remained in the double-digit territory despite the erosion of valuations.

The company talks about investing in trends to benefit from the changes in society. In the case of Global Consumer Trends, Robeco sees these three long-term trends — the digital transformation of consumption, the rise of the middle class in emerging markets and increased consumer attention on health & wellbeing. Robeco says that while investments have been scaled down in the past few months, a change such as the shift to digital payments is unlikely to reverse and there is long-term validity of certain investment themes.

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