Page number 2

OUTLOOK Politics matters in the 2020 s 2024 is the biggest election year the world has ever ex­ perienced, with about half of the world population voting. Why is this important to longer-term investors? “The probability of political interference is high, and it matters more than ever.” No company or stock exists in a vacuum Governments have the powers to fundamentally change the short and long-term profit dynamics and after-tax returns for companies and minority shareholders. The probability of political interference is high, and it mat­ ters more than ever as government spending across the world is at a historic high. It matters how governments, central administrations and central banks manage their significant role and influence in societies. Figure 1 on the following page shows historic government involvement in the all-important US economy. The repercussions of unexpected election results in sig­ nificant countries like India, Mexico and Indonesia are yet to be seen. We have recently returned from a company research trip in Indonesia (a population of 275 million with an average age of 29 years). Even Local experts were uncertain about the political future. This is exactly our Bo Knudsen CEO and Portfolio Manager C WorldWide Asset Management 2

Page number 3

OUTLOOK Figure 1 Total Government Spending as of % of GDP % 50 USGovernment spendingas%of GDP 45 40 35 30 25 20 15 10 5 0 1800 1806 1812 1818 1824 1830 1836 1842 1848 1854 1860 1866 1872 1878 1884 1890 1896 1902 1908 1914 1920 1926 1932 1938 1944 1950 1956 1962 1968 1974 1980 1986 1992 1998 2004 2010 2016 2022 Source: IMF, 2024 point; a more political environment, with greater govern­ ment influence, can lead to a more unpredictable invest­ ment environment. We live in a world dominated by “Big Government”, as described in our 2022 white paper titled “The Rise of Big Government – Investment Implications”, which we plan to update later in 2024. In today’s world, governments have more influence compared to the free-market forces that ruled the world post the fall of the Berlin Wall. De­ spite the increase in uncertainty, we continue to identify select themes and trends that remain relevant and that will coexist with Big Government creating long-term in­ vestment opportunities. This is a key part of our upcoming Big Government paper. India, Mexico and Indonesia need to and will continue down the road of creating better living conditions for their big, growing and young populations. This creates societies that eventually move up the value chain and the consumption ladder seeking a better qual­ ity of life. It is the natural evolution towards creating a fundamentally healthier economy – not unlike humans striving towards a fundamentally healthier body. This is built on a foundation of better incomes, giving access to more protein and fat-rich diets. In the same way, it is built via the expansion of basic infrastructure for growth consisting of a sound financial system and a government and governance structure low on corruption that the pop­ ulation can trust. These building blocks also include a basic support system and safety net that provides basic education and healthcare. All three countries stand a very good chance of delivering over the coming decades, even if there are some questions that will be answered in the coming quarters regarding the agendas of the new or changed leadership mandates post the elections. The mindset of a government and the leader of a country matters As politicians increasingly manage countries, the country factor is back and alive in the 2020s. Just like the mindset of management matters in a company, where we have witnessed the creation of trillions of US dollars of market cap driven by the conviction of a few individuals. The significant progress in India over the past 10 years has been driven by the mindset of Modi. Shorter-term political uncertainty is not just an emerging markets issue. The snap election in France that Macron 3

    ...