What do the 2020s have in store for investors? Big-picture thinker David Dowsett sets out the ten trends he foresees emerging over the next decade, along with their investment implications.
We are coming to the end of a tumultuous decade.
Arguably, the three megatrends of the 2010s were the result of events that occurred in the previous decade.
The global financial crisis (2008) led to a decade of global quantitative easing (QE).
This prevented recession but skewed economic returns in favour of capital rather than labour. Frustration regarding an unfair division of the spoils has subsequently arisen.
The failures of the Iraq War (2003-11) have led to a general collapse in trust in the institutions and objectives of the Western liberal democratic consensus.
This has resulted in a rise in populism in the West, most obviously exemplified by Trump and Brexit, and the emboldenment of non-democratic states and actors, such as Putin with his actions in Ukraine and Syria.
The angst and uncertainty generated by these developments in the West have been amplified and accelerated by the third key event of the 2000s. The invention of the iPhone in 2007 has, over the past decade, facilitated an explosion in the use of social media.
Twitter, Facebook, Reddit and Instagram have become the battlegrounds for grievance, conspiracy and fake news.
These platforms may be the modern-day equivalent of Speakers Corner, but now anyone can have a global megaphone. The angriest about inequality or with a vested interest in undermining the post-Cold War order have tended to be those who have been heard the most.
From an asset-class perspective, the historical returns of the past decade are shown here on an annualised basis.
The numbers suggest:
1. Outperformance of US assets
2. Outperformance of long-duration assets
3. Outperformance of risky credit
4. Underperformance of emerging markets and commodities
Assets typically have a bias towards performing in 10-year cycles.
With this as background, how might the political, economic and policy-making environment change as we move into the 2020s and what are the major investment implications?
I’ve identified 10 key trends to monitor in the 2020s.