10 Themes for the Next 10 Years

BofAML | We enter the next decade with interest rates at 5,000-year lows, the largest asset bubble in history, a planet that is heating up, and a deflationary profile of debt, disruption and demographics. We will end it with nearly 1bn people added to the world, a rapidly ageing population, up to 800mn people facing the threat of job automation and the environment on the brink of catastrophic change. At the same time, 3bn more people will be connected online and global data knowledge will be 32x greater than today. The social, political and economic responses to these challenges, all heading to a boiling point this decade, will overhaul traditional paradigms. We outline BofAML Transforming World’s top 10 themes to help investors navigate this decade ahead.

  1. Peak Globalization: the end of unrestricted free movement of labor, goods, and capital around the world. Winners: local markets, real assets; Losers: global markets.
  2. Recession: record numbers of FMS investors think the global economy is late-cycle, the bond market bubble is set to unwind and populism is likely to be inflationary. Winners: inflation, real assets, infrastructure; Losers: growth, credit, deflation.
  3. Quantitative Failuremonetary policy measures are proving less and less effective at boosting corporate and household “animal spirits”. Winners:Keynesianism, gold; Losers: financial assets, Monetarism.  
  4. Demographics: the number of grandparents will outnumber the world’s children; every second 5 people enter the EM middle class and Gen Z overtakes Millennials. Winners: eCommerce, new consumer; Losers: bricks & mortar, legacy consumer.
  5. Climate Change: investors are more focused than ever on global warming’s impact on the economy, society, unemployment and migration. Winners: clean energy, electric vehicles; Losers: fossil fuels, diesel cars, single-use plastics.
  6. Robots & Automationup to 50% of jobs at risk of automation by 2035Winners: automation, local production, big data & AI; Losers: humans, global supply chains.
  7. Splinternet: China to overtake the US and become the world leader in AI by 2030. ‘Sovereign internets’ expandWinners: emerging markets/the East; Losers:developed markets/the West.
  8. Moral Capitalism: US$20tn of AuM is going into ESG strategies over the next 20 years = nearly market cap of S&P500Winners: ESG, impact investing, stakeholders; Losers: business-as-usual investing, solely profit-maximizing firms.
  9. Smart Everything500bn connectable devices by 2030 to combat deflationary demographics but at the risk of the death of privacyWinners: IoT, connectivity, smart cities, ‘big brother tech’; Losers: privacy, offline.
  10. Space:tourism and nanosatellites are the next frontier for an industry that could be worth cUS$1tn by 2030Winners: aerospace & defence; Losers: legacy satellites.

Image: corno.fulgur75 on Foter.com / CC BY.