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Innovation

INVESTMENT INSIGHTS  |  July 2017

2017 Midyear Outlook

For the first time in years, the world’s major economies all appear to be on the road to recovery. This shift is creating opportunities for investors to rebalance their portfolios to take advantage of new opportunities overseas as well as in the bond market.

Download our 2017 Midyear Outlook for an in-depth look at how economic momentum is building across the globe amid political uncertainty. Our research pinpoints unique opportunities in non-U.S. markets as the macroeconomic backdrop is positive for global growth. There are also ways to position fixed income portfolios as interest rates are likely to remain lower for longer in the U.S.

Highlighted below are some of the key insights from our Midyear Outlook. 

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INVESTMENT INSIGHTS  |  January 2017

The Future Is Now: Disruptive Technology Trends in 2017

As innovation continues to create new markets and challenge existing industries, Capital Group investment professionals share their insights on how disruptive technology can benefit investors in 2017.

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INVESTMENT INSIGHTS  |  October 2016

The Long View: The Changing Face of the Global Consumer

Consumer spending, long a driver of the global economy, is undergoing sweeping change. Whether it’s housing for millennials or health care for baby boomers, a significant shift in the way people spend money is underway in both advanced economies and the developing world.

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INVESTMENT INSIGHTS  |  April 2016  |  FEATURING Michael T. Kerr

The Long View: Investing in U.S. Innovation

The United States’ economy is in the midst of an extraordinary transformation, one that has the power to redefine America’s future. Across the country, the nation’s resilience in the face of adversity and its entrepreneurial spirit are providing unprecedented opportunities for companies and investors.

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INVESTMENT INSIGHTS  | 
January 2016
 |  FEATURING Kevin G. Clifford , Timothy D. Armour & Robert W. Lovelace

Investment Themes to Watch in 2016

American Funds portfolio managers Tim Armour and Rob Lovelace discuss investment opportunities in the emerging markets, oil and commodities, health care and pharmaceuticals, and the internet.

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INVESTMENT INSIGHTS  | 
December 2015
 |  FEATURING Diana Wagner

Obamacare Cost Pressures Yield Investment Opportunities

An investment analyst discusses the problem of high costs associated with the Affordable Care Act and the types of companies best positioned to capitalize on the solution.

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INVESTMENT INSIGHTS  |  October 2015  |  FEATURING Timothy D. Armour

Digital Dollars: Ad Money Didn’t Waste Any Time Moving Online

Advertisers have flocked to the Internet and mobile as consumers change behavior

The face of the world’s media market is changing. Advertising dollars are increasingly flowing from traditional ads to digital. Increased spending on mobile, social media and digital video propelled U.S. digital advertising revenue to $49.5 billion for the full year of 2014, a 16% increase over 2013.

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Online and social media rival television as the main source of news in the U.S.

How people consume news has undergone a sea change. More people now get their news from digital sources than they do from either print newspapers or the radio, and digital is starting to make a move on TV as the dominant place people go for news.

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INVESTMENT INSIGHTS  |  October 2015  |  FEATURING Brad Barrett

Going Mobile: The Serious Business of Playing Games

With sales about to exceed $100 billion a year, video games are hardly kid stuff

In 2013, Grand Theft Auto V became the fastest-selling entertainment product of all time, with sales of $1 billion in just three days. That probably disabused most people of the notion that video games were kid stuff.

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INVESTMENT INSIGHTS  | 
September 2015
 |  FEATURING Brad Barrett

Changing Channels: Media’s New Direction

Media analyst Brad Barrett discusses changes in the media landscape being brought about by changes in technology and innovative new business models.

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INVESTMENT INSIGHTS  |  August 2015  |  FEATURING Shaw B. Wagener

The Future Is Under Construction

Urbanization is nothing new. It’s been going on for centuries, and it helped make Europe and the United States global economic and political powers. But what is different about today’s wave of urbanization is its unprecedented speed and scale — it’s bigger and faster than ever.

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INVESTMENT INSIGHTS  |  August 2015  |  FEATURING Joanna F. Jonsson

Urbanization Is Transforming the World — Again

Per Capita GDP Has Risen in Tandem With Increases in the Urbanization Rate

Source: Exhibit from Urban World: Cities and the Rise of the Consuming Class, June 2012, McKinsey Global Institute, www.mckinsey.com/mgi, © McKinsey & Company. All rights reserved. Reprinted by permission. Urbanization is the increasing number of people living in cities as populations shift from rural to urban areas; the definition of urbanization varies by country. Pre-1950 data for the United Kingdom are estimated. Historical per capita GDP is expressed in 1990 Geary-Khamis dollars, which reflect purchasing power parity (PPP) that estimates the amount of adjustment needed on the exchange rate between countries in order for the exchange to be equivalent to each currency’s purchasing power. PPP helps determine the exchange rate adjustment so that identical goods and/or services in different countries have the same price when expressed in the same currency.

The wealth of nations soars when societies shift from rural to urban

Urbanization isn’t a modern phenomenon. In centuries gone by, the shift to living in cities underpinned the industrial revolutions of Europe and the United States and the rise of those regions to global economic and political power.

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INVESTMENT INSIGHTS  |  August 2015  |  FEATURING Joanna F. Jonsson

Getting Taller All the Time: Maybe the Sky Isn’t the Limit

2014 Was the “Tallest Year Ever,” With the Completion of a Record 97 Buildings Above 200 Meters

Sources: CTBUH Year in Review: Tall Trends of 2014, and Forecasts for 2015, Council on Tall Buildings and Urban Habitat; KONE Primer, CS European Capital Goods, May 2015, Credit Suisse. The total number of buildings completed for each year includes tall (600+ feet/200+ meters), supertall (900+ feet/300+ meters) and megatall (1,900+ feet/600+ meters) buildings; projected data for 2015 and 2016 represent expected, not possible, completions. The data for elevators and escalators are Credit Suisse estimates, based on company data as of fiscal year 2014, for new installations and maintenance.

The 3,281–foot Kingdom Tower in Saudi Arabia will be the world’s first kilometer–tall building

Elisha Otis founded The Otis Elevator Company in 1853, but it was the company’s 1903 innovation called the gearless traction elevator that set in motion a remarkable change in the urban landscape.

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INVESTMENT INSIGHTS  |  August 2015  |  FEATURING Andrew H. Dougherty

A $57 Trillion Bill for Infrastructure Is Coming Due

Global Investment (Trillions), 2013–2030

Source: Exhibit from Infrastructure Productivity: How to Save $1 Trillion a Year, January 2013, McKinsey Global Institute, www.mckinsey.com/mgi, © McKinsey & Company. All rights reserved. Reprinted by permission. McKinsey calculated the estimate of
$57 trillion, or 3.5% of global gross domestic product, for global infrastructure need through 2030 by compiling projections of demand in the different infrastructure categories shown. The estimate for telecom covers only those members of the Organisation for Economic Co-operation and Development, plus Brazil, China and India. The estimated investment amounts, expressed in constant 2010 dollars, may not sum due to rounding. The constant dollar is an adjusted value of currency used to compare dollar values from one period to another.

The world faces a massive construction project just to keep up with projected growth

Some countries need infrastructure that simply meets basic human needs, such as safe drinking water. Another may want to modernize its transportation network, and still others may be trying to lay the groundwork for future global competitiveness by building a national broadband network.

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INVESTMENT INSIGHTS  |  August 2015  |  FEATURING Todd M. Saligman

The Secret to Keeping People in the Air? Groundwork

Airport Construction Projects Worldwide and Investment Amount (in Billions)*

*As of January 2015

Source: CAPA - Centre for Aviation, Premium Airports Database, centreforaviation.com/data/airports. Data are for existing airports with projects either in progress or planned for and with a good chance of completion.

Globally, $543 billion worth of airport construction projects are in progress

China started working on a new airport near Beijing on December 26, 2014. The airport, which is being designed by Netherlands Airport Consultants, is expected to be completed in 2018 and cost about 
$14 billion. Upon completion, the 7.5 million square foot terminal will accommodate about 45 million people per year.

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INVESTMENT INSIGHTS  |  August 2015  |  FEATURING Gregg E. Ireland

Africa Leapfrogs Landlines, and Takes a Shortcut to the Bank

Sources: 2014 State of the Industry: Mobile Financial Services for the Unbanked, March 2015, Groupe Speciale Mobile Association (GSMA); “Banks Vie for a Piece of Africa’s Mobile Banking Market,” August 15, 2014, The Wall Street Journal; Safaricom Limited FY15 Presentation. The GSMA Mobile Money report is available at http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2015/03/SOTIR_2014. The data for mobile financial accounts per 100,000 adults are as of June 2013. The total M-Pesa transactional value of $45 billion is for the fiscal year ended March 31, 2015.

Technological advances can allow countries to skip building out traditional infrastructure

Africa provides one of the classic examples of technology trumping traditional infrastructure. The introduction of mobile phones has allowed millions of Africans to receive the social and economic benefits of telephone networks without the sunk cost of massive landline infrastructure.

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MARKET COMMENTARY  | 
June 2015
 |  FEATURING Richmond Wolf

A Renaissance for Health Care, but Can Economy Keep Up?

An investment analyst discusses the great strides seen in health care innovation and outcomes in recent years, but wonders whether the U.S. economy can support the proliferation of new drugs soon to be on the market.

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INVESTMENT INSIGHTS  |  May 2015  |  FEATURING David Carpenter

Digital Is Transforming the Music Business

Music Downloads Top the Charts

Source: Recording Industry Association of America. Data are based on year-end shipment statistics for the recorded music industry in the United States and represent the cumulative total of all four music formats shown in any given year. Units refers to the raw volume of products, which may be physical or digital, in a given category. Vinyl, cassettes, CDs and downloads all include both albums and singles.

iTunes rocked the industry, but streaming may represent another seachange

Yes, sales of vinyl records are surging — nearly 10 million old-fashioned platters were sold in 2013, the most since 1997. Who’s buying records? Mostly hipsters into indie-rock, and diehard audiophiles who contend vinyl recordings sound better than digital (among recent bestsellers on vinyl: Jack White’s Lazaretto and Beck’s Morning Phase). While it’s nice for old times’ sake to see vinyl win a battle, the war over how we listen to music may be over, and if digital hasn’t already won, the others may be down for the count.

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INVESTMENT INSIGHTS  |  May 2015  |  FEATURING Richmond Wolf

Unleashing the Immune System

Renewed focus on research and technology boosts biopharma revenue growth

Source: EvaluatePharma®, March 2014, Evaluate Ltd, www.evaluate.com. Data are based on sales totals that include conventional, biotechnology, other unclassified and over-the-counter sales.

Innovation in biopharma has changed the pharmaceutical industry, and the way we treat cancer

Cancer has a cloaking mechanism that’s so efficient the immune system can’t see the disease. That cloak of invisibility, however, may soon be pulled away thanks to revolutionary new approaches in immuno-oncology, which harnesses the patient’s own immune system to recognize and fight cancer.

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INVESTMENT INSIGHTS  |  May 2015  |  FEATURING Nicholas J. Grace

Warp Speed: Churn Rate for S&P 500 Is Accelerating

Sampling of companies that have entered and exited the S&P 500 Index, 1979–2015

Sources: S&P Capital IQ; Standard & Poor’s Analysts Handbook, 1980, and Stocks in the Standard & Poor’s 500, 1982, Standard & Poor’s Corporation; Dow Jones Newswires, 1987, Dow Jones; and Reuters.com, 2015, Thomson Reuters. Standard & Poor’s 500 Composite Index℠ and S&P 500® are service/trademarks owned by the McGraw-Hill Companies, Inc.

Many companies have turned disruption into opportunity 

Yale professor Richard N. Foster, co-author of Creative Destruction, has a warning for executives whose companies are now listed in Standard & Poor’s 500 Composite Index: Your days may be numbered.

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