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global manufacturing sector begin to pick up.
And could be in a period of time where we do
resume earnings growth.FORTUNE: There are some sectors where price-to-
earnings ratios have become very, very high, out
of line with historical averages, and that’s another
thing that makes some investors nervous.SHARPS: Yeah, I think the returns this year
have been powered by technology, and you
can say the same thing of really the entirety
of this bull market. If you look this year at
the performance of Apple, of Microsoft, that’s
unlikely to be sustained. The valuations are
more attractive for some of the big Internet
companies. But there are risks around those
right now from a policy and a potential regu-
latory perspective.BROWN: The elephant in the room is that every
single asset class is up double digits this year.
If we had had this meeting a year ago, when
we were in that 20% decline, and if you had
been asked, “What’s the outlook for 2019?,”
would your answer have been, Yes, every as-
set class from gold to Treasuries, high-grade
corporate bonds, high-yield, U.S. large-cap
stocks, European stocks, Japanese stocks,
emerging markets—all up? I think we’ll get
dispersion of asset classes next year. It would
be very unlikely to have two back-to-back
years where literally every asset class works.SUBRAMANIAN: We’re starting to see some of
these beaten-down, deep-value names outper-
form or come back to life. And what worries
me about the S&P 500 in particular is that if
we do see this value rotation, the companies
that are going to outperform the market aren’t
big enough to offset some of the companies
that are going to underperform the market.FORTUNE: So it’s more of a stock picker’s market
than an indexer’s market?FUNK: We’ve had a rising tide with many,
many boats. I’m less concerned about valu-
ation expansion when it’s coincident withmost compelling investment opportunities
today are the companies that are solving cus-
tomer problems, and frankly solving some of
our thorniest social problems as well. In terms
of access to better health care, whether it’s
access to data in computation or whether it’s
access to clean water, we’re not going to need
any less of those things anytime soon.
ANGELA STRANGE: A lot of companies I’m invest-
ing in have got a seven- to 10-year view before
they’ll even hit the public markets. But some
of the best companies launch when the market
dips. People start to look to save more money,
they look for better services, and they’re apt to
switch from incumbents. And so sometimes it
is a better time to get started as a company.
ROB SHARPS: Because we’ve had a record-long
expansion, does it imply that we’re headed
into a recession or that the bull market needs
to be over? I would say no. We could have the