Markets Outlook

Secular investment themes and supercycles in global markets

Secular trends can often drive investment markets for year after year after year. Understanding these trends, and figuring out whether they are set to reverse or continue, can be crucial to long-term investment success.

The Savvy Investor Research Team has curated numerous papers which examine secular or structural themes. Here is a flavour of some of the best: For more, use the search box above:

1. Structural Trends in Equity Market Valuation (Absolute Return Partners, 2015)

This 2015 document from Absolute Return Partners examines the structural factors driving equity prices, including share buy-backs and dividends, corporate profits as a share of GDP, interest rates, demographics and valuations. 

2. Five-Year Return Forecasts for Major Asset Classes (Northern Trust, Aug 2015)

In constructing their five year return forecasts for the major asset classes, Northern Trust examine some of the current secular themes currently impacting markets; in particular debt levels and deleveraging, aging developed markets and transitioning emerging economies.

3. Super-cycles of commodity prices since the mid-1800s

This paper examines the long-term relationship between economic output and commodity prices, in order to identify supercycles in real commodity prices and to place the current commodity cycle into context.

4. From boom to bust: A typology of real commodity prices in the long run

With a similar starting point to the paper above, this paper examines the history of real commodity prices from 1850-2011, explaining long-term trends, medium-term cycles, short-term fluctuations and periods of boom and bust.

5. A New ‘New Normal’ In Demography And Economic Growth (Research Affiliates)

In this fascinating paper, Rob Arnott and Denis Chaves argue that the "historically unmatched" economic growth enjoyed by developed nations over the past 60 years has been driven by temporary and abnormal demographic conditions: an abnormal growth in the working-age population, supporting both a declining number of young people and an as-yet modest cohort of seniors. In other words, we have enjoyed an unrepeatable demographic dividend of huge proportions.

6. The Profits Bubble - An Historical Perspective (Research Affiliates)

Another paper from Research Affiliates, with a similar thrust to the one above. The authors argue that corporate profits unreasonably high, well above their historic norms, and destined to fall back to earth. The paper looks at the share of profits in the economy, placing it in an historical context.

7. Future Equity Patterns and Baby Boomer Retirements (SOA, 2015)

How will changing demographics impact asset prices? This is an important question for long-term investors. This excellent paper from the Society of Actuaries reviews the evidence from sixty different papers and covers asset classes from equities, fixed income and property. The general consensus appears to be that the retirement of the baby boomer generation will slowly but surely depress equity valuations and asset prices over time.

8. The long and short of baby boomer balance sheets (JP Morgan, Oct 2015)

This research examines how baby boomer balance sheets have evolved over time, before attempting to analyse and quantify its impact for investors and markets.

9. Five demographic mega-trends that commcercial real estate can't ignore (TIAA Henderson, 2015)

This paper looks at five demographic megatrends that real estate cannot ignore. These megatrends are: urbanisation; shift of economic power from the "West"; the rise of the global middle class; ageing demographics; global interconnectedness.

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