08 DEC

2017

Asset Allocation , Topics

Benefiting from long-term global shifts

When taking a closer look at world GDP, we recognize three super-cycles. The first is the second industrial revolution, the second the post-war economic boom and the third the emerging-market growth that dates from the beginning of the new millennium. These super-cycles are driven by the opening-up of new markets, increasing trade and high rates of investment, urbanization and technological evolution. For a long-term investor, these super-cycles, together with various "megatrends", offer big opportunities. Candriam has listed four ongoing megatrends that will change the global economy and that could create highly profitable investments.

DEMOGRAPHY: The Ageing Power

The world population continues to grow and is set to reach almost 10 billion by 2050, according to the latest UN Population Revision. Population growth is highest in the emerging markets. For instance, by 2050, the Megatrends Watch Institute expects 57% of the world population to be living in Asia/Pacific. Population growth will nevertheless decrease over time, even in emerging markets, while life expectancy is bound to increase. A new megatrend will emerge from these demographic shifts, namely ageing societies. By 2050, there will be more people over 60 years old than children under 15 years old, pushing the average age of the population to 38 years.

Meanwhile, urbanization continues and the world’s megacities are set for major growth. The UN states that there are currently 37 megacities in the world. By 2050, that number will have passed the bar of 120, each of them housing more than 10 million inhabitants. This increase is the result of 1.5 million people adding to the global urban population every week and requires massive investments. The UN estimates that large cities such as New York, Beijing, Shangai and London will need to invest over 8 trillion dollars over the next ten years!


 

DEVELOPING ECONOMIES: Emerging Supremacy

Emerging markets not only have the highest expected population growth for the coming decades, they are also expected to surpass the developed economies. According to PWC estimates, the emerging E7 economies (China, India, Brazil, Mexico, Russia, Indonesia and Turkey) could comprise about 50% of world GDP by 2050, while the G7 (United Kingdom, France, Germany, Italy, Japan, the US and Canada) share could decline to only just over 20%, both these economies dominating the list of the largest economies in the world in GDP terms.

This strong economic growth has ushered in wealth and a growing middle class. According to Ernst & Young, four billion people are expected to enter the middle class by 2050, and Asian middle-class consumers will account for more than the half the world’s retail spending.



 

TECHNOLOGY: Dances With Robots

The technological-breakthroughs megatrend directly impacts every other megatrend, with every industry and consumer undergoing its influence. Not only is the world’s top supercomputer 60 trillion times more powerful than the first one, but computers are starting to have a ‘human face’. Robots will be an integral part of our daily life by 2050, whether through financial trading, shopping, education, business communication or even our health. For instance, Peek Vision’s "Peek" app enables us to have a cataract scan via our smartphone, perform simple vision tests and scan the retina for disease.





ENVIRONMENT: Giving Impact To Investments

In a rapidly changing world, investors are starting to pay more attention to sustainable, responsible and impact investing. The speed with which the world is changing is breathtaking and examples are all around us. We notice, for instance, that the deforestation of half the world’s rainforests in the last 50 years has impacted global diversity and could result in the extinction of 40% of all species by 2050. Not forgetting the impact of global warming on sea levels, forcing migration, the acidification of the oceans and extreme weather conditions. Awareness of the social and environmental challenges will continue to increase and investors will become more demanding each year as regards the sustainability of their investments.

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