The COVID-19 pandemic is changing the economy. Supertrends are evolving with it.
The coronavirus pandemic is creating huge challenges for both people and the economy. However, shocks are known to create fertile soil for future growth. Even Credit Suisse's Supertrends are following current developments, thus remaining convincing themes for long-term investing. We provide an update below.
Financial investing for a more egalitarian society
In our previously titled “Angry societies” Supertrend we find that popular discontent since the coronavirus outbreak is focused more clearly on issues at home, in particular inequalities. The pandemic has, if anything, shown that the real emerging threats are global and require multilateral cooperation, as well as individual protection.
Anger has now ceded to anxiety. People are expected to shift their focus to finding solutions to their greatest concerns: affordable housing, education, health care, security, private retirement provision, and continuous employment opportunities. We believe there is room and support for a mix of public and private efforts in these areas. This socio-politically oriented Supertrend has therefore evolved into what we now call our “Anxious societies – Inclusive capitalism” Supertrend.
Invest in smart infrastructure, and profit from the boom
Regarding our “Infrastructure – Closing the gap” Supertrend, we believe that infrastructure spending is about to explode – both in "old" and in "new" national economies. The expectation of lower (and sometimes even negative) interest rates for an extended period should provide the right incentive for investment and be a tailwind for this theme.
We have expanded our focus from traditional infrastructure like transport, energy, and water to include the infrastructure needs of tomorrow and combined them in a new subtheme called “Smart cities.” Among the growth trends, we expect telecom infrastructure with data-driven technology in cities to address new needs for public health security driven by the coronavirus pandemic.
Invest in the technology sector, and drive advancements
Speaking of technology, ongoing innovation as well as the challenges uncovered by the coronavirus crisis continue to make technology a compelling sector for investors. We still believe that the drivers for this investment theme – in terms of demand as well as technological progress – remain powerful and firms within our areas of focus in the “Technology at the service of humans” Supertrend should benefit in coming years. For example, edge computing is opening new frontiers to digitalization and related applications.
Smart investors profit from demographic change
The “Silver economy – Investing for population aging” Supertrend, our most defensive theme, remains on track. The aging population is a well understood phenomenon by now and likely to continue to drive business opportunities and investment performance for many years to come. Population aging will in particular unfold in emerging markets (EM) at a speed not yet realized by most. Additionally, consumer spending worldwide should get a boost from wealthy seniors in coming years.
Put your money on the values of millennials, leveraging opportunities
Just like their older EM counterparts, young EM consumers in our “Millennials’ values” Supertrend will drive consumption tastes and trends around the world in coming years. We retain our strong responsible consumption and environmental, social and governance (ESG) focus.
With health also at the top of the Millennials’ agenda, we are witnessing the rise of healthy, sustainable food: the planetary diet. Hence, we have incorporated the topic, along with the transition to a circular economy, into our Supertrend.
Know the new Supertrend, and help fight climate change
The Millennials and Generation Z cohorts have pushed for and driven forward a more sustainable way of doing business. So much so that we believe a tipping point has been reached with respect to the responses of broader society including governments, consumers and companies to climate change. We hence introduced a new sixth Supertrend: “Climate change – Decarbonizing the economy.”
We believe there is an investment case to be made around the companies that contribute most effectively to the transition to a less carbon-intensive world economy. Investors will find a variety of sectors interesting, especially power generation, fossil fuels, transportation, and agriculture/food production. The recent economic shutdown caused by the COVID-19 outbreak has reduced man-made GHG emissions substantially in certain regions, which clearly signals what could be achieved in the future.