We believe five factors will be the most important drivers of market outcomes over the next decade: (1) the rise of China; (2) climate change; (3) technology; (4) debt; and (5) demographics.
Nov 16, 2020
23 minutes
Sahil Mahtani
Philip Saunders
The fast view
China is going through three distinct transformations: a shift from fixed-asset investment to consumption; a shift up the value chain and towards technological independence in key areas like semiconductors; an outward economic expansion, for example through the ‘belt-and-road’ strategy.
Investors need to consider two types of climate risk: physical risks – the main ones in the next decade arise from extreme weather; and transition risks, which are the risks and opportunities arising from the response to climate change, including shifts in policy and consumer habits.
Watch for technology impacts in these areas: better healthcare, a growing abundance of goods and services, a transformation of the workplace, innovations in personal mobility, and the return of state intervention.
Debt levels had been relentlessly rising internationally before the pandemic, but COVID-19 has worsened the financial position of every economy. How governments respond will influence market outcomes.
Longer lifespans will put pressure on government deficits for decades to come. Investors also need to watch for demographic impacts on GDP growth, as well as for idiosyncratic consequences of population shifts – for example on trends in property markets.
General risks:
All investments carry the risk of capital loss.
Sahil Mahtani
Strategist, Investment Institute
Philip Saunders
Director Investment Institute
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