We are talking about megatrends: great social, technological, economic, political, natural changes that last for decades. Forces capable of shaping history. And in which you can invest. Let's take a closer look at the main megatrends, numbers in hand.
DEMOGRAPHY
The world population is growing and aging. From 1900 to 2000, the increase in the human population was three times higher than in the entire previous history of humanity: it went from 1,5 to 6,1 billion individuals in just 100 years. In the last 200 years, then, improved health conditions have significantly increased life expectancy. The growth rate of the world population, albeit decreasing, remains positive, so that the planet will be increasingly crowded: in 2050 the world population is expected to reach 9,5 billion people, with a share of over-65s equal to 16% of the total. Among the many implications of all of this, there is the growing demand for services related to:
– health, especially of the elderly;
– biotechnology (related to health)
– free time, as a large portion of the population will have time and money to spend.
Furthermore, an older population should invest more in bonds, capable of providing supplementary income, supporting its demand and therefore its value.
GROWTH OF THE MIDDLE CLASS
It is said that the middle class is disappearing: data in hand is not true, at least worldwide. On a global scale, in fact, the number of individuals living in poverty continues to decrease.
This is matched by real (ie inflation adjusted) per capita income growth, worldwide – the chart below leaves no room for doubt.
It can be argued that economic growth is not everything, and that many other things count, above all education, which is the basis of social mobility. Certain. But education is linked to income. Indeed, literacy has grown exponentially (see chart below) globally. Add the dissemination of information, especially the internet, the improvement of the condition of women, the mobility of goods and people, and we arrive to the progressive affirmation of a global middle class, which is growing above all in Emerging Countries.
The concrete impact of a middle class that grows in importance is manifold, taking the form, for example, in:
- increase in spending in goods and services related to health, well-being and leisure, especially in Emerging Countries;
- growth in consumption and investment, especially infrastructural ones, in Emerging Countries, which still have growth potential in terms of urbanization and industrialization.
SUSTAINABILITY
A planet with limited resources and a growing population that consumes more and more is an obvious problem. Above all, it means having to contend with natural resources, first and foremost water (according to the OECD, around 3,9 billion people will live in conditions of severe water scarcity in 2030). Similarly, the calorie requirement increases progressively on a global scale (see graph below). Without forgetting that climate change and carbon dioxide emissions are problems destined to accompany humanity for a long time.
The implications of these environmental dynamics are various:
– in all likelihood the demand for energy, water, food and natural resources, which are increasingly scarce, will further increase;
– a significant growth potential is expected for agribusiness, not only for the production of food for humans, but also for animals, due to the increased demand for meat and poultry in emerging countries;
– renewable energies, such as solar and wind energy, should increasingly establish themselves;
– in general, products and services with a low environmental impact, based on the efficient use of scarce resources, and founded on principles of sustainability and ethics, should have better opportunities.
TECHNOLOGY
The speed and the impact of technological innovation they are constantly growing. In fact, according to Moore's Law, technological change grows exponentially: the number of transistors in an integrated circuit doubles approximately every two years, to the benefit of computing power. And they are not delusions of fantasy: look at the graph (in a semi-logarithmic scale, to make the exponential dynamics linear – and more legible).
The impact of technological innovation pervades all sectors of the economy and private life, facilitating automation and increased efficiency. Nanotechnology, biotechnology, 3D printing, block-chain, artificial intelligence, robotics, digital media and connectivity are just some of the technological forces that are changing the world – but the technological panorama is really broad.
INVESTING IN MEGATRENDS
Let's get to the point. Investing by looking at very long-term trends has an undoubted charm: the focus is on the "big picture", that is, on the great changes of the planet and of the human population that infests it, oops, inhabits it. And it certainly cannot be said that there is a shortage of trends. These are mostly equity investments; the chart below gives you an idea of how they've fared recently.
Although the average performance of these megatrend indices from December 2003 to the present is 167%, compared to 74% for the generic MSCI World equity index (which has a very similar risk), striking differences can still be found between individual megatrends. This is exactly the point: how to ride the right wave and surf the megatrends? It will be the subject of the next episode.
Source: BlogAdvise
