Supertrends – assessment so far and outlook for investment trends one year on
Credit Suisse's Supertrends, which were launched in 2017, present investors with long-term investment themes. One year on, it is clear that the five Supertrends have proved their worth. Why an active investment strategy is important, particularly during periods of increased volatility.
Supertrends remain topical
In 2017, Credit Suisse identified the following five investable Supertrends:
- Angry Societies – Multipolar World
- Infrastructure – Closing the Gap
- Technology at the Service of Humans
- Silver Economy – Investing for Population Aging
- Millennials' Values
It has been shown in the last 12 months how topical the Supertrends investment themes are. Active investment strategies create value through careful selection – they are the right choice for investors especially during periods of increased volatility in the global equity markets.
Multipolarity is impacting investment strategies
The emergence of a multipolar world, for example, could not have been clearer. After years of hyper-globalization, trade tensions since the beginning of 2018 have shown that several poles of similar economic and geostrategic strength have emerged. They are adjusting economic policy and international relations in their own interest far more assertively than in the past.
In turn, emerging markets are increasingly aware that they have become an important pole themselves. Given their population size, emerging markets also are the consumer markets of the future. In line with this, the Supertrend "Angry Societies – Multipolar World" and the selected priorities have captured the mood well.
Supertrends under discussion at the G20 summit
Of all the Supertrends, infrastructure has been the slowest to take off. In 2016, this theme was one of the most compelling investment propositions, but it subsequently slowed despite its undisputed relevance. It is no coincidence that the 2018 Buenos Aires G20 Summit lists infrastructure among its three top priorities. The G20 infrastructure outlook projects a USD 15 trillion investment gap until 2040.
Once infrastructure spending returns to the fore in the USA and other countries and in light of rising interest rates, the theme is likely to come back to the spotlight. Thus «Infrastructure – Closing the gap» remains one of the five Supertrends.
Volatility of the technology market confirms Supertrend
The approach adopted in the technology field has also proved correct. Since the Supertrends launch, Credit Suisse has advocated diversifying technology investments to include not only today’s tech giants like Google and Apple, but also smaller companies in areas like virtual reality, leaders in artificial intelligence and robotics as well as new areas like health tech.
The recent Facebook scandal and the market volatility that accompanied it confirm this approach. Furthermore, the selected focus areas have continued to gain relevance. This applies to artificial intelligence for example, which helps to lower energy consumption.
Aligning investment strategies with demographic change
Population aging has become a topic of focus around the world. Old age goes hand-in-hand with age-related illnesses. Healthcare companies that focus on these conditions can therefore benefit. Smaller biotechnology companies are currently seeing an uptick in merger and acquisition activity, while larger pharmaceutical companies are the true leaders in terms of scale.
Beyond healthcare, the elderly will continue to spend their savings on consumption and activities tailored to their needs, while the working population expecting to live longer will require pension fund and asset management solutions to build savings available for consumption once they retire.
Growing media interest in the Supertrends
Meanwhile, the Millennials tide is just at the beginning. People currently under the age of 30 make up half of the population worldwide and are increasingly influencing businesses and the values of global firms. In recent months, a number of media and marketing initiatives have picked up the theme.
The Financial Times, for example, introduced a special section on Millennials in its electronic version, reflecting the growing interest in the characteristics of this particular generation. According to Google Trends, web searches on news related to Millennials have doubled over the past twelve months, underpinning the increased visibility of this generation.
Optimized Supertrends for improved investment strategies
While all five Supertrends remain fully valid, a number of new features and adjustments are introduced. Blockchain as one aspect of the Digitalization subtheme has been added to the "Technology at the Service of Humans" Supertrend. This technology could be usefully deployed in many ways, and could thus be regarded as an accelerator of digitalization, for example. In addition, this provides an opportunity for investors to further diversify into new areas that will benefit from technological developments in future.
The "Infrastructure – Closing the Gap" Supertrend has also been expanded through a fourth subtheme "Telecom Infrastructure," as a fourth sub-topic, as 5G technology is expected to lead to significant investment in this sector. In terms of regional focus, there is additional potential for infrastructure investments in Africa and Latin America. Last but not least, environmental, social and governance criteria are set to remain a key topic and investment focus for Millennials.