Insights by New Capital at EFG Asset Management

Long Term Investing – Secular Growth Explained


  1. The Covid-19 pandemic accelerated some secular growth trends. One example is e-commerce. E-commerce penetrations (as a percentage of the total US retail sales) rose from 12.2% in 2009 to 20.8% by 2019, or roughly 0.9% increase per year. In 2020, e-commerce penetrations soared due to lockdowns: from 20.9% in December 2019 to 26.8% in April 2020 – pulling forward four years of e-commerce growth in just four months.
  2. Higher rates hurt “growth” stocks more than “value” stocks. This is because when we value equities using Discount Cashflows, “growth” stocks’ cashflows are further in the future and therefore more sensitive to changes in discount rates
  3. the underperformance of secular growth stocks since November 2021 can be attributed to a combination of 1) secular growth taking a pause to digest covid gains; and 2) rising bond yields compressing equity valuations.