Growth beyond crisis – Investment themes reshaping our world

23rd April 2012

Yet still, despite the evidence, it's too easy to get sidelined by short-term noise. Long-term investors should be asking whether their asset mix is suitable for the coming decades as unless you are an obsessive day trader the short-term market moves won't make much difference.

Virginie Maisonneuve, Head of Global and International Equities at Schroders, says: "Markets are notoriously fickle in the short-term. But more than ever since mid 2011, they have been reacting to the most immediate macro events of the day. Their focus has swung from one event to another, each with an equally short time horizon.

"This has been at the expense of a more long-term analysis of company fundamentals. However, it is our view that key to strong investor performance is the assessment of sustainable growth beyond the immediate crisis. Given today's ecological stress, finite natural resources, burgeoning debt levels, population ageing and strong shifts in global competitiveness (to name but a few of today's challenges), companies must continually assess their ability to tap into sustainable end demand…

"Leaving aside the quality of management that companies require to be successful, we believe that key themes such as demographics, climate change (and related issues such as energy availability and security) and the "Supercycle" (or the evolving role of the large emerging market economies in the global economy, especially regarding consumer demand, resources and geopolitics) are inseparable from the sustainability debate and must be considered very carefully by companies and investors alike."

So what are some of the long-term themes that should be considered by investors?

Energy Crisis

The facts around climate change may be disputed, but few would argue that there is an energy crisis in the making. Demand for energy is rising as traditional sources of energy are increasingly depleted or environmentally toxic.

Soon the world will be forced to embrace renewables. The high price of oil will promote the development of renewable technology, and the attractiveness of investing in this sector. Shares in this sector may still be on their back, but there's no doubt it's an emerging industry with exciting growth prospects.

After all, we have a global economy that needs energy, but there is only a finite supply of oil available in the world. Companies producing alternative energy should do well as a result, as people are turning to these sources of energy to meet their essential needs.

At the same time, there is growing pressure in the form of domestic and international legislation aimed at combating climate change. These changes in legislation show no sign of abating – directives are actually becoming tighter. In addition, lifestyles are changing globally as people embrace the importance of protecting the environment. Today, there are huge incentives for people to invest in alternative, cleaner, energy solutions.

BRICs

The BRIC economies – Brazil, Russia, India and China – are well positioned to weather any global slowdown compared to the West.

With a solid macroeconomic environment, available fiscal and monetary policy options, continued positive domestic demand and strong growth dynamics, the outlook for the BRIC markets appears positive.

https://mail.google.com/mail/images/cleardot.gifThe BRIC countries are expected to continue to be economically successful over the next five to ten years, and their stock markets have recovered strongly over the past six months.

Some of the most significant lifestyle changes will occur in emerging markets. Web use is growing faster in countries such as China, India and Brazil than in western nations as the burgeoning middle classes take advantage of internet shopping and social networking.

New Technology

The leaps made in mobile technology in recent years are staggering, and show no sign of stopping.

While mobile broadband will become increasingly like today's fixed-line services, the speed of these services is itself set to soar.

In the recent budget, Chancellor George Osborne said that he wanted the UK to be the ‘technology hub of Europe'. He backed his plans with tax breaks for technology businesses and cash to update the UK's flagging broadband network.

Meanwhile, a  recent report by the Boston Consulting Group suggested that the ‘Internet Economy' was already a significant contributor to UK GDP.

Virgin Media, for example, the market leader in fibre optics in Britain, is well-placed to benefit from increased demand for superfast services.

With more people online, companies are also finding better ways to store information. Cloud computing, where data is stored at a central location and transmitted to devices wirelessly, has been developed, and demand is set to grow. The question is – what's next?

 

More from Mindful Money:

Attack of the fund-sucking Zombies

The sins of high frequency trading

Could fracking save the UK energy sector?

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