Private Banking Supertrends 2023: Investing reimagined.

An environment of geopolitical uncertainty, higher inflation, rising interest rates, and recession fears demands imagination from policymakers, companies and investors. Our Anxious societies Supertrend identifies the immediate opportunities within these developments, while Infrastructure and Climate change target the benefits from the large-scale, long-term investments being made by governments in energy security and a low-carbon future. The role of Technology in business and society continues to grow, with AI emerging as the next driver of efficiency and productivity. Digitalization is central to our Millennials Supertrend as well, which anticipates the markets that will be impacted by the values and tastes of Gen Y and Z. Meanwhile our Silver Economy Supertrend looks at the investment potential within the lifestyle priorities of the fastest-growing age group in society — the 65+.

Trends to watch

Anxious societies

Given ongoing geopolitical tensions and social instability it is no surprise that affordability, employment and personal security are popular concerns worldwide. Companies that provide ways to lower the costs of basic needs like food, housing, healthcare and education should prosper. In the workplace, demand is likely to grow for products that improve workflow and allow employees to acquire new skills. More broadly, anxiety is amplifying appetite for protection — from violence, crime, cyberattack, and, since COVID, the threat of disease.

Infrastructure

Governments are spending on infrastructure. Energy is at the forefront of this trend and the urgent need to build new energy supply chains makes LNG a sector to watch for opportunities in production, transformation and transportation. Smart and connected cities are the future and they will be dependent on telecommunications infrastructure. New climate legislation should accelerate adoption of electric vehicles in the US, which will reward companies that build and operate charging stations, while infrastructure operators globally will welcome the return of Chinese tourists.

Technology

2022 saw AI enter the mainstream as ChatGPT became the fastest-growing app, ever. AI has the potential to bring efficiency and productivity improvements to industries as different as construction and food services, and its popularity will open up growth opportunities for cloud software, IT services and platform companies. Virtual reality and augmented reality applications could follow a similar trajectory. Collaborative robots are an example of the automation that will power Industry 4.0. Digitalization offers solutions to many challenges in society. As societies age, healthtech should be especially relevant.

Silver economy

China is the latest country to see its population peak, following Germany, Italy, Japan and Spain, and seniors (age 65+) are expected to be the only age cohort in society that will increase in size in the coming decades. Biopharmaceutical, medical technology and life sciences companies that focus on the elderly will benefit. So too will like-minded health and life insurance companies, private wealth advisors and managers, and companies that address the discretionary wants and needs of seniors across a variety of areas, including travel, beauty and luxury goods.

Millennials’ values

Tech-savvy Millennials favor global digital platforms that disrupt traditional business models: the ongoing transformations in retail, finance and media all demonstrate the power of the Millennial consumer. Emerging markets are big drivers of future consumption. The reopening of the Chinese economy should boost global growth due to the spending of the young middle-class and their taste for luxury goods. Companies continue to tap into the green attitude of Millennials, with sustainable food, clean energy and responsible production and consumption high on their agenda. Millennials are ready to spend on fun, health and leisure too.

Climate change

Western governments are accelerating the build-out of domestic renewable energy capacity as they seek energy security in the wake of the Ukraine war. China is also developing mega-sized renewable centers. This should make companies expanding CO2-free power generation and developing electricity-storage technologies attractive. Metals of the future is a new sub-theme of this Supertrend. Renewable energy technologies and electric vehicles require more minerals than their fossil-fuel based equivalents. Companies focusing on sustainable metals and mining are therefore likely to become essential to the supply chains of these industries and others as the world works towards achieving net zero emissions by 2050.

What does this mean for investors?

A major strength of our Supertrends framework is its flexibility. Effective diversification requires investors to stay alert to near-term opportunities while pursuing long-term strategies. These Supertrends and their underlying themes provide the building blocks for each investor to manage asset allocation according to their own convictions, preferences and investment goals.