A higher-inflation regime for stock markets is here to stay, and that means there's likely to be a new round of winners and losers in equities, said Lisa Thompson, equity portfolio manager for Los Angeles-based Capital Group, with $2.1 trillion in assets as of Sept. 30.
In a presentation Thursday at the New York Stock Exchange, Ms. Thompson outlined her views on where stocks are headed; she manages Capital Group's New World Fund, Capital World Growth and Income Fund, and International Growth and Income Fund.
"We take a longer-term view of five to 10 years. This environment will have more inflation than the post-global financial crisis period. It (inflation) may come down in the short term, but in general, we are in a higher inflation regime than in the past 12 years," Ms. Thompson said. "We're not going back to 2017 prices."
That has implications for stock-picking going forward.
"We've all grown up in a disinflationary environment for the past 30 years," and in a new inflationary regime, that requires "looking for new winners."
Megacap technology companies, for example, have had a tremendous run over the past decade, but the potential for major growth isn't as likely, Ms. Thompson said.
"These larger companies are more economically sensitive. Internet advertising is mature, plus there's competition such as TikTok."
Instead, "we're looking at midcaps that can grow 20% a year for the next 10 years going forward."
She declined to mention specific company names, as per firm policy, but recalled an example of a one-time tech winner: "Remember when Cisco was one of the largest companies in the world?"