The past decade has been saturated with various economic events, among which were the consequences of the global financial crisis and the recovery of markets after it. The next ten years promise to be no less interesting and complex, a variety of factors will influence the world economy, from deflation in many countries, low interest rates, to an increase in the population and its aging.
Portal Investopedia published A list of five major economic trends over the next ten years, compiled by analysts at Bank of America Merrill Lynch Global Research. We have prepared an adapted version of this material.
One of the megatrends that analysts expect to see is the development of a global recession. Global economic growth is slowing, and more and more financial experts are seeing evidence of completion of the growth cycle.
Financial regulators around the world are confronted with the limited effect of their monetary policy, which leads to stagnation in some segments of the economy and growth in others. For example, according to analysts, over the next ten years we can expect inflation of exchange rates, an increase in the demand for real assets and infrastructure projects, while deflation, the volume of credit financing and the overall growth of the economy will decrease.
Changing of the climate
According to the bank, over the next ten years, the world’s population will increase by almost 1 billion people. This will not only lead to even greater competition for limited resources, but can also accelerate the process of global warming.
All this will have obvious economic, political and economic consequences. So, according to the report, “by 2030, climate change could make it possible for 100 million people in developing countries to fall below the poverty line.”
Robotics and automation
A Bank of America study cites a report from the 2018 World Economic Forum that, by 2022, only 59% of the tasks in 12 business sectors will continue to be completed by people.
By 2035, this figure will drop to 50%, while the other half of the tasks will be fully automated. There are even bold predictions that artificial intelligence can equal performance with humans by 2029. As a result, the global labor market and traditional production chains will change dramatically, and many people will face the need to change jobs.
On the other hand, areas such as automation, local manufacturing, AI and machine learning will show significant growth, which should be taken into account by investors.
The heyday of “moral capitalism”
Another megatrend that analysts note is the heyday of so-called moral capitalism. It’s already noticeable that the traditional approach, when the main goal of any corporation is to extract the maximum income for shareholders, is rapidly becoming obsolete.
In modern conditions, companies are forced to take into account not only the opinion of shareholders, but also the desire of employees, local communities, environmentalists, etc. The term ESG-strategies (Environmental, Social, and Governance) arose, the development of which in the next 20 years will be directed up to $ 20 trillion. Analysts expect to see fewer situations with inadequate bonuses for CEOs and corporate executives, and more projects to redistribute resources and stimulate unconditional basic income.
Another global trend – everything around will become even more intelligent. According to some estimates, in the next ten years, another 3 billion people will get access to the Internet, by 2030 the total number of connected devices will be 500 billion.
However, in the next five years, the average time for interacting with gadgets will drop to 18 seconds from 6.5 minutes today. This means that on average a person will interact with a connected device up to 4,800 times a day. And it’s not even about the development of 5G technology, in 10 years it may already be out of date, and even its capabilities will cease to be enough.
In addition to the development of IoT, cybersecurity risks will also grow – the costs associated with them will reach 7% of global GDP by 2021.
How do investors protect their finances?
As you can see, in the next years one should not expect calm in the markets that will respond to global and local events and processes, the emergence and implementation of new technologies.
In such situations, conservative investors who want to avoid unnecessary risks should use investment tools that fit this strategy. These include, for example, structural products or model portfolios.
Structural Products – These are various financial instruments collected in a single portfolio. It works like this: assets with low risk and a small possible profit and more risky assets are “collected” in a structural product, which, if successful, can bring a higher income.
The idea is simple – if the risky tool “does not work” and there is a loss on it, then it will be compensated by the profit from the less risky asset – therefore its volume in the structure of the structural product is higher. For example, 90% of a structural product may be federal loan bonds (OFZ), and 10% of a company’s shares.
In turn, model portfolio – This is an investment portfolio, which consists of several securities selected on certain grounds (for example, bonds or shares of one sector of the economy). Something similar to a structural product, but there are fewer risk management opportunities, although you can start investing with slightly smaller amounts (tens, not a couple of hundred thousand rubles).
Such portfolios are convenient for novice investors who have several tens of thousands of rubles, but have no experience working on the exchange, which means that there is a high probability of losses in independent trading. Each portfolio has an indicator of expected return, so the investor understands how much he can earn.
Useful links on the topic of investment and stock trading:
- Open a brokerage account online
- Test account with virtual money
- Software for trading on the exchange: trading terminal, mobile applications
- Structural Products
- Model Portfolios
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