Digging deeper, you’ll find that the U.S. and China are setting the pace in some key underlying trends, most notably in the technology sector. They are essentially the only countries in the race for superiority in artificial intelligence (AI) and big data. It’s impossible to predict who is going to “win” this race. The U.S. may have an edge in developing the underlying technologies, while China has an edge in operationalizing it. But it’s clear these two countries have significantly more research and development spent than any other country in the world.
“If you’ve got something really big and really important where it’s not clear who’s going to win, you want to have some investments in both sides of that,” said Scott Berg, CFA®, portfolio manager for the Global Growth Equity Strategy. “So, China and the U.S. are both a meaningful part of any global portfolio, from my perspective.”
China’s Five-Year Plan
We know from China’s publicly published Five-Year Plan that its focus is on tech independence, the environment, and societal equality. It also had aspirations around the environment and inequity in society, ensuring that the income gap doesn’t become too wide. The new plan comes out in March 2021, and it’s likely to have the very same priorities.
Moffett says that U.S.-China tensions haven’t really affected his buying criteria.
“If investors do their due diligence, they really don’t need to be overly concerned about short-term tensions,” he says. “Invest in high-quality companies that can compound regardless of what happens. World-class companies with world-class management teams de-risk short-term concerns.”
The reality is that the economies of the U.S. and China are inexorably intertwined, so they can’t really get a divorce. The good news is that this leads to an unparalleled depth—and breadth—of investing opportunities.