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Thematic Investing Faces Headwinds Amid Rising Rates

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  Published in Stocks and Investing on Wednesday, January 21st 2026 at 14:37 GMT by The Globe and Mail
      Locales: CANADA, UNITED STATES

The Shifting Landscape: Market Factors and Thematic Performance

For years, a tailwind of low interest rates and abundant liquidity has propelled many thematic investments. Sectors like clean energy, in particular, have thrived thanks to favorable government subsidies and readily available capital. However, the economic tides are turning. Rising interest rates and a contraction of liquidity are now impacting returns across various asset classes. This reality compels investors to re-evaluate their thematic strategies.

The clean energy sector serves as a stark example. While once benefiting from incredibly supportive conditions, the rising cost of capital and reassessments of government spending priorities are creating headwinds. Identifying these macroeconomic shifts and their potential impact on specific themes is paramount for achieving long-term success. Ignoring these broader market dynamics is a recipe for potential losses. A crucial skill for any thematic investor is the ability to separate genuine long-term potential from short-term hype fueled by artificially low interest rates or temporary subsidies.

The Power of Alignment: A Cohesive Investment Team

Beyond market analysis, a tightly aligned investment team is a critical differentiator between successful and struggling thematic investors. Recent conversations with a consistently high-performing thematic investment team underscored the importance of this alignment. It's not merely a shared investment philosophy; it's a collective agreement on the specific stocks held within the portfolio.

This shared understanding fosters better, more consistent decision-making, especially during periods of market volatility - a certainty in today's environment. Individual investors often succumb to emotional reactions and inconsistencies, but a disciplined team operating in lockstep can weather the storm and maintain a long-term perspective. This unified approach minimizes individual biases and ensures a more robust and resilient investment strategy.

Top Picks for 2026: A Thematic Portfolio Snapshot

Based on this framework of market understanding and team alignment, here's a snapshot of investment selections favored by a leading thematic team:

• Waste Management (WM): This pick highlights the importance of essential services. Waste Management provides a consistently needed service, buffering it from many cyclical market downturns. Opportunities for consolidation and expansion within the waste disposal and recycling industries offer long-term growth potential.
• Brookfield Infrastructure Partners (BIP): Focused on essential infrastructure assets like utilities, transportation networks, and communications, BIP is viewed as a hedge against rising inflation and increased demand. The team believes the company's diversified infrastructure holdings provide a stable foundation for consistent returns.
• Qualcomm (QCOM): With the continued global adoption of 5G technology, Qualcomm's position as a leading chip manufacturer positions it to capitalize on increased demand. The company's technological leadership in wireless communications makes it a compelling long-term investment.
• Enphase Energy (ENPH): This selection reflects confidence in the long-term trajectory of renewable energy. Enphase, a manufacturer of microinverters and energy storage systems, is well-positioned to benefit from the ongoing transition to sustainable power sources. The team sees this as a crucial part of a portfolio exposure to the wider environmental and sustainability trends.

Important Disclaimer: The Globe and Mail Investment Committee does not provide investment advice. This content is for informational purposes only and should not be considered a recommendation to buy or sell any specific security. Consult with a qualified financial advisor before making any investment decisions.

Looking Ahead

Thematic investing, when approached thoughtfully, can be a powerful tool for long-term portfolio growth. However, understanding the broader market context and cultivating a consistent, aligned investment strategy are essential for navigating the challenges and reaping the rewards. As the investment landscape continues to evolve, a disciplined and informed approach will be key to success.