Top 10 Trends for next 5 years
Pillars:
A. Environment (1)
B. Technology & Innovation (2)
C. Society & Politics (4)
D. De-Globalization: Supply Chain & Covid
1. Climate Change, as irreversible as it is, will create plenty of challenges, but generate few good investment options related to Carbon sequestration. Over the next years, an increase of 2 Cº temperature will produce major natural catastrophes. One-third of the Earth's animal and plant species to extinction by 2050 if current greenhouse gas emissions trajectories continue — a catastrophic loss that would irreversibly reduce biodiversity and alter both ecosystems and human societies across the globe. New Initiatives to Reverse Climate Change are mostly focused on Carbon sequestration. A good example is that Organic will be gradually replaced by Regenerative Agriculture. The FAO’s 2015 Status of The World’s Soil Resources report, assured that “Food production systems will need to change to create multifunctional agro-ecosystems capable of maintaining a balance between yields, soil functions, and biological diversity.
2. Is the sky still the limit? Humans will conquer Space in 2024 with Artemis missions. NASA will land the first woman and first person of color on the Moon, using innovative technologies to explore more of the lunar surface than ever before. NASA will collaborate with commercial and international partners and establish the first long-term presence on the Moon. This is the democratization of space!
3. Most Innovation will come from services, and out of all services-related industries, fin-tech is positioned to win, particularly thanks to Crypto. The increase of almost 93% in the value (compared to 2022) shows that if the growing trend continues, bitcoin will actually be able to reach the predicted price of $126,127 by the end of 2025. Cryptocurrency is important and it is not going away, or be limited to 100 years as others may speculate: transactions are fast, digital, secure and worldwide, which in essence allow the maintenance of records without risk of data being pirated. Fraud is, actually, minimized.
4. Thanks to all the money pumped in by governments during 2020 and 2021, inflation will become a key issue. In addition to searching and identifying inflation-independent investments, such as those like camping grounds that will grow even more, how will inflation affect each investment? Large companies will become larger? Large brands take over? Is there still space to grow brands in a time when global logistics require more financial muscle and connections, like with logistics companies? We are back to the pre pandemic highs of 3400 which seems to be where a lot of stocks have already ventured. In many ways, this makes perfect sense from the point of view that the pandemic did not create real value for the economy or most companies, but rather destroyed it. Valuations are still near their highest levels ever as shown by the earnings yield...and subtracting inflation gives you a real negative earnings yield. This theoretically means you're buying-4% earnings contraction at today’s levels.
5. Rising Income Inequality will expand Political Extremism and Populism, and not only in Developing countries anymore. In the last decade, the average income gap between the top 10% and bottom 50% of individuals within countries has almost doubled. Polls do show that overwhelming majorities of Americans now think the country is going in the wrong direction, are unhappy with Congress and its leaders, and want to elect new representatives.
6. Democracy, as a concept, is now at risk. More people live in countries with Authoritarian regimes, than in those with Democratic regimes. In countries with long-established democracies, internal forces have exploited the shortcomings in their systems, distorting national politics to promote hatred, violence, and unbridled power. Those countries that have struggled in the space between democracy and authoritarianism, meanwhile, are increasingly tilting toward the latter. As of today, some 38 percent of the global population live in Not Free countries. Only about 20 percent now live in Free countries.
7. Psychological Health is a growing concern as people are feeling lonelier and focusing more on pets, and less on social interaction. At the same time, people are living longer.
8. China's rise to the main power of the World has been delayed at least until 2035 mostly due to financial markets. The MSCI China was trading at about 1.4 times book value when the 2022 outlooks by Wall Street banks started coming out in mid-December. The multiple fell as low as 1.1 times this month, the lowest in data going back to 2000.
9. De-Globalization has started thanks to the Russia-Ukraine war & rising trading costs. Increasing trade-restrictive measures can be expected in the near future. This would be a de-globalization which implies the partial sacrifice of the specialization gains resulting from the international division of labor. Also, Russia and China have been pursuing a strategy of “de-dollarization” for several years. They are increasingly replacing the dollar with other currencies.
China will focus inwards to develop its own domestic market which accounts for 18.85% of Global GDP in 2022 and will rise to 20.19% in 2026.
10. Covid-related Supply Chain issues will have shocking medium-term consequences, including political and social unrest. The supply chain crisis may hike global consumer price levels by an additional 1.5 percentage points as a result of increased maritime transport costs. Also, the International Monetary Fund cited that supply chain downgraded its forecast for global economic growth for 2022 to 4.4% from 4.9%. Fertilizers and Food will become scarce and unavailability will create social and political unrest, but it is not clear if this will happen in developed/buying countries or in developing/selling countries as it will depend on purchasing power and logistic availability. Supply Chains will be restored through innovation, perhaps thanks to submarines or drones, or smaller 1-person planes.