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Secular Supertrends - BIS says 30-year cycle set to reverse

Long-term investors can harness big secular trends

Investors can be fickle. Fashions come and go. But some of today's secular trends will last a lifetime. As a long-term investor, if you can identify and understand these "supertrends" correctly, you can position your portfolio to harvest long-term alpha.

The Bank of International Settlements has just released a hard-hitting paper which suggests that a 30-year secular trend - driven by demographics and globalization - is set to reverse, leading to higher inflation and higher real rates of interest.

vinyl records 30 year trends white papers

Demographics will reverse three multi-decade global trends (BIS, 2017)
BIS argues that the big secular trend of the 1980s and the 2000s, is going into reverse. The impact of demographic trends and the integration of Asian and Eastern European labor into global markets has led to a stagnation in real wages, deflationary pressures and falling interest rates. This is now turning around. In the future, the authors argue, real interest rates will rise, and inflation and wage growth will pick up.

Supertrends - Investing for the Long Term (Credit Suisse, 2017)
This 97-page report has been produced by Credit Suisse. It analyses the key trends affecting long-term investing, such as geopolitics, demographic shifts, and rapid technology change. These movements provide a tangible link between today’s major developments and portfolios' risk/return profiles in the long run. 

Longer Term Investments: Automation and Robotics (UBS, 2017)
In this paper by UBS, the authors discuss recent trends and the outlook for factory and process automation, industrial software and 3D printing, as well as commercial drone and AI. They believe that automation companies can outperform the recovery due to structural trends like demographic changes, rising labor costs in emerging markets, the drive for productivity gains, and rising IT penetration.

Global opportunities in a de-globalising world (Invesco, June 2017)
(For compliance reasons, this paper is not accessible in certain geographies)
While globalization has been a dominant trend for many years, the U.S. presidential election and Britain’s vote to leave the EU are just two examples illustrating there may be a shift back towards nationalism and, by extension, protectionist policies. The authors of this paper explain that an increase in market disintegration can present new and different opportunities for investors.

Capturing Megatrends: Ageing Populations (STOXX, July 2017)
As populations get grey, long-term economic growth is likely to stay sluggish. But demographics also spell opportunities.

Driverless cars: How innovation paves the road to opportunity (Invesco)
(For compliance reasons, this paper is not accessible in certain geographies)
Disruptive technologies and trends are radically reshaping the investing landscape across sectors, asset classes and geographies. This paper examines the investment implications of one such game-changing innovation: autonomous driving technology and specifically driverless cars. 

The Deep Causes of Secular Stagnation and the Rise of Populism (GMO, 2017)
In this paper, James Montier and Philip Pilkington of GMO argue that the rise of populism has its roots in the same sources that have given rise to so-called “secular stagnation.”

Key trends driving alpha in the tech sector (Wellington, July 2017)
The technology sector is increasingly complex, supply chains are becoming more global, and the pace of innovation and disruption is accelerating. This paper examines the key trends driving alpha.

Equities and Income in an Ageing World (Nikko AM, July 2017)
In a world of falling bond yields and low inflation, the ‘Search for Income’ has become a popular phrase in capital markets over the last decade or so. This paper looks at the demand-side factors which may be driving this appetite.

Five-Year Capital Market Outlook (Willis Towers Watson, 2017)
This paper by Willis Towers Watson takes a detailed look at the capital market outlook for the next 5 years. It discusses risk management, portfolio construction, implementation and monitoring, and more. 

Secular Outlook for Global Growth: 2016–2035 (Fidelity Investments)
Fidelity’s Asset Allocation Research Team employs a multi-time-horizon asset allocation approach that analyzes trends among three temporal segments: tactical (short term), business cycle (medium term), and secular (long term). This report focuses exclusively on secular trends that may influence the long-term outlook for various asset classes. 

Why Artificial Intelligence is the Future of Growth (Accenture, 2016)
With the recent convergence of a transformative set of technologies, economies are entering a new era in which artificial intelligence (AI) has the potential to overcome the physical limitations of capital and labor and open up new sources of value and growth. Accenture analyzed 12 developed economies and found that AI has the potential to double their annual economic growth rates by 2035.

Artificial intelligence: our savior or humanity's final invention? (Robeco)
Artificial intelligence (AI) is a broad concept which has been around since the 1950s. Does it provide a limitless positive future or will it be humanity’s last invention? This paper see opportunities in the ‘narrow’ form of AI.

How do demographics impact asset prices and equity valuations? (The Savvy Blog)
There are many factors driving asset prices and equity market valuations. This blog post argues that the most predictable secular trends are demographic, and recommends a number of papers which examine the impact of demographics upon asset prices.

The Future of Asset Management - top white papers (The Savvy Blog, July 2017)
In recent months, some great white papers have been released which examine the evolution and the future of asset management. The Savvy Research Team has selected the top papers on this theme, covering technology, regulation, demographics, Brexit, and more.

The megatrends reshaping the asset management industry (The Savvy Blog, 2016)
The investment industry is being reshaped and re-moulded by a variety of megatrends. These include the renewed rise of indexing in different forms, technological innovations, changing regulations, aging populations, and an uncharted monetary policy backdrop. Below we have listed a selection of the best papers covering these secular themes, which are impacting the asset management industry.

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