Insync produced another positive return for May. Since 2018, the underlying portfolio surpassed its benchmark in 5 out of 6 calendar years (see next page). Furthermore, both funds consistently achieved their objectives over five-year rolling periods after fees. These results show Insync's meticulous, data-oriented investment strategy consistently yields robust performance.
AI-Earnings & Prices: Whilst we have a high level of confidence in the growth in AI and its impact across most industries, there usually comes a point where valuations become excessive as investors become overly exuberant. In many instances valuations are now rising faster than earnings. And so we have trimmed our exposure to many of our AI based holdings in line with Insync’s data driven approach. We believe now is the time for prudence as whilst valuations could become even more extended, once the tide turns stock price falls can be dramatic.
Down-trading Megatrend Transformation of Consumer Behaviour
The growing bifurcation of wealth is significantly influencing consumer behaviour. More middle-class individuals are opting for affordable options as the gap between high and low-income earners widens. This shift is further fuelled by economic uncertainty, with concerns over inflation and potential recession driving consumers across all income levels to prioritize value-oriented purchases.
 With inflation eroding purchasing power, many are trading down to maintain their standard of living. The depletion of excess savings accumulated during the pandemic adds to the risk of reduced discretionary spending. Spending priorities are also shifting. Consumers are reallocating budgets to afford essentials or experiences they value more; whilst enhanced access to information via | technology enables better deals through price transparency and comparison based shopping tools. This cultural shift transforms bargain-hunting from being stigmatised to smart and savvy, influenced by economic conditions and evolving perceptions of value.
Discount retailers are capitalizing on this trend. Offering brand-name products but at reduced prices, they attract a diverse consumer base. In the US$995 Bn US Apparel, Footwear, and Home market, off-price retailers hold a 7.8% share. The sector's long-term growth potential is substantial, with each 1% market share gain equating to approximately $10B in revenue, signalling significant future market share opportunities.  This retail powerhouse not only thrives during economic downturns but also has a vast growth trajectory as discount retail continues to capture a larger share of total retail spending in good times too. With its robust performance and potential for sustainable earnings growth, this company is set to deliver impressive returns for years to come. |
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