Learn more about market trends Supertrends. Driving forces.
What do the Hollywood blockbuster film Crazy Rich Asians, the gilets jaunes protests in France, and the global climate school strikes have in common? They all are a testimony to the sweeping societal changes we picked up on two years ago when we launched our five Supertrends. Political shifts lead to change in economic policy focus, while demographic trends precipitate technological innovation, as well as evolving preferences and needs.
Investors can react to these changes or, better yet, try to stay apace with them. Our five Supertrends aim to do the latter. They cover a broad variety of timely topics: security; infrastructure; population aging; the influence of the next generation; the environment; and technology, among others. The Supertrends are focused on structural driving forces and are designed to transcend economic ups and downs. They aim to improve a portfolio’s overall risk/return profile and outperform the broader market in the long run.
Our own conviction in these trends remains strong. We have added a couple of new angles like the seemingly unexciting but nevertheless significant rise of the pet industry as people increasingly adopt animals to alleviate loneliness, and we have sharpened our focus in existing themes like infrastructure and technology.
Around the world, there is a shift away from the political establishment toward populist leaders and outsiders who pledge to prioritize national interests. Populist parties now form part of every third European government, according to Swedish think tank Timbro. In the USA, there are signs that society’s polarization may further widen ahead of the 2020 presidential election. Relatedly, the shift towards a multipolar world is evident in the USA’s trade tensions with China as well as with neighbors and allies. We believe that security firms, national brands in developed markets, and consumer companies in emerging markets (EM) are best placed to adapt to this changing socio-economic backdrop.
Infrastructure investments have been on the back burner over the past year as simmering global trade tensions and rising interest rates weighed on the sector. Underlying fundamentals remain strong, however, and this theme should again attract attention this year as headwinds weaken and new catalysts emerge. Among these, China’s Belt and Road Initiative is pushing into Europe and will likely spur more infrastructure investment in the region. Furthermore, efforts by the G20 to better enable the private sector to invest in public infrastructure should help boost investment in this sector.
Technology investments have had a strong start to 2019, providing a positive backdrop for our Supertrend “Technology at the service of humans.” Structural growth trends such as increasing data usage and the need for greater efficiency should continue to support this Supertrend. The race between the USA and China for global leadership in artificial intelligence (AI) and automation provides an important long-term catalyst in the deployment of 5G, the adoption of AI applications and digital automation. Both areas – AI and automation – are also expected to become increasingly important in the digital health, fintech and education markets, which are expected to grow strongly in the years ahead.
At the heart of the “Silver economy” Supertrend lies the expectation that the world’s senior population will double from just short of a billion senior citizens at present to over two billion by 2050. On a global scale, this demographic shift has accelerated in recent years and is continuing with strong momentum. What is appealing about this Supertrend is that, regardless of the state of the world economy, politics and other more medium-term drivers, the population will continue to age, creating new needs in areas such as healthcare, insurance and funding solutions, consumer and property markets.
The Millennials have become a force to be reckoned with – politically and economically. Today corporations not only cater to the 20-35-year-olds, known as Generation Y, but increasingly also to Generation Z, the under 20-year-olds, which we jointly refer to as Millennials. Generation Z is at the forefront of a global climate change movement, driving a heightened focus among companies on environmental responsibility and sustainability. Their influence also extends to education, with technology becoming more and more important as a new way to deliver education and develop skills. As for leisure, they are driving the popularity of social gaming and eSports.