Advice matters
Key ‘megatrends’ shaping investment markets

The history of investing is strewn with examples of fads that have come and gone, as well as longer-term trends. And then, there are so-called ‘megatrends’: major movements, patterns or trends that are set to have a long-term effect on a global scale.

Megatrends can shape the global economy, our societies, and the investment landscape. What’s more, they usually don’t exist in isolation but rather collide and overlap, generating new investment themes.

Recently, multi-national financial services corporation Morgan Stanley identified four megatrends that – they believe – are poised to be the current ‘engines of transformation’. It’s good food for thought for investors who are looking at diversifying their portfolio with an eye on the future.

  1. Automation

The global labour shortage that we’re experiencing now (contributing to inflation) is a by-product of several factors, including pandemic-driven immigration disruptions, a shift in workers’ expectations, and the world’s ageing population.

So, more and more industries are expected to turn to automation to keep productivity up – a transition that may be facilitated by lower technology costs. According to MS, over the next 10-15 years, companies that enable or adopt AI, machine learning and robotics are well-placed to see a boost – potentially delivering opportunities for investors.

  • Healthcare innovation

Healthcare has made sweeping advancements over the past few years, with technology enabling exponential changes in the way care is delivered and received. MS identified three sectors to watch in particular: genomics, biotech, and diagnostics.

All of these are giving us an increasingly accurate understanding of how human bodies are built, and how they can be treated more efficiently. And with a widespread use of data and analytics, these innovations may empower preventive care for better health outcomes.

So, how can investors benefit from this? Once again, with diversification. It’s unlikely all companies will see the same growth, depending on industry trends, and research and development. That’s why it’s always important to make investment decisions through the lens of your risk profile.

  • Decarbonisation

The ongoing energy crisis set off by the Russia-Ukraine war has made it abundantly clear that decarbonisation cannot wait any longer.

As The Economist reports, many Governments are responding to the spikes in fossil-fuel prices by ramping up their investments in clean-energy technology. And more and more consumers are also taking an interest in green energy. For example, according to the New Zealand’s Energy Efficiency and Conservation Authority (EECA), worldwide sales of electric vehicles increased 41% in 2020, compared to general car sales dropping 16%.

As MS explains, over the past decade, lower production costs have also made renewable energymore accessible. This, coupled with higher demand, could pave the way for a faster clean-energy transition.

Environmentally-conscious investors may find opportunities in companies that are behind renewable energy technology, those transitioning away from fossil fuels, and also oil and gas-focused firms investing or branching out into renewables. If you’d like to explore your options, get in touch: we can help you understand how this type of investment fits within your risk profile.

  • Cybersecurity

As digital technologies play a bigger role in everyone’s lives, and attacks get more and more sophisticated, cybersecurity is a growing concern. And it’s not just a matter of business continuity. Data shows that many attacks are conducted by geopolitical adversaries targeting key supply chains and infrastructure.

The US Center for Strategic and International Studies (CSIS) has been keeping track of all significant cyber incidents since 2006 – those that hit Government agencies, defence or high-tech companies, or resulted in losses of over $1 million dollars. The number went from 4 in 2006 to 123 in 2021 (slightly lower than 2020, when the attacks were 132).

In this framework, cybersecurity spending will likely continue to grow, and MS believes that this could boost long-term investment returns in that area. Get in touch to learn more about the opportunities in this sector.

Megatrends and long-term investing

As head of Thematic Investing at Morgan Stanley, Vijay Chandar pointed out, when investing on a long-time horizon, “we can’t just think about how the world looks like today.”

No one really knows what the future may hold, but we can spot investment opportunities within the trends that are gathering real momentum. According to MS, megatrends are likely to be long-lasting, because they are rooted in fundamental change on a global scale – including demographic shifts, technological advancements, and new societal needs.

Of course, your investment strategy still depends on your individual needs and goals. Like to explore your options? Get in touch: we’re here to help you ensure that your investments match your requirements, expectations, and values.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.