How global megatrends are shaping our world

Global megatrends are the sorts of shifts that affect the interest rates we pay, our rate of national productivity and our relationship with other countries. These powerful forces impact our lives in profound ways, providing enormous opportunities alongside significant risks.

Our investment managers use their knowledge of global megatrends to provide valuable insights, which in turn guide their investment decisions. Read on to find out more.

The impact of Covid-19

The global pandemic has affected everyone and everything. It's changed how we live and how we work. And right now, the future of our economies rests on our ability to control and live with the virus and make the right decisions about global trade.

In Australia, monetary policy has softened the economic effects of the pandemic for now. But there's no doubt that vaccines are our way out of the crisis. The higher the number of vaccinated people, the fewer restrictions, which will help our economy recover. Nonetheless, administering millions of vaccines is presenting its challenges. But our lives, our economy and social cohesion rely on it.

At this point, global economic recovery is uneven. China and South-East Asia are leading the way, with the US not far behind. But the ever-increasing divide between rich and poor continues to grow, and we have no idea of the social consequences.

Shifting economic power

The focus of global growth has shifted away from western economies. Emerging markets such as Brazil, Russia, India, and China are quickly transitioning from economies of production to economies of consumption. These markets are starting to export their capital, talent, and innovations while trading between them increases at great speed.

There's no question that change is in the air. The US, Europe, China, Russia, and India all want to increase their influence in the geopolitical, economic, and technological spheres. The EU and the UK have parted company, and China's global strategy is creating increased tension.

It's clear that the old world order is breaking down and disrupting global trade. We're now living in a world where power is beginning to move from Washington to Beijing. And we're edging closer to a time when it'll become increasingly important to speak Mandarin.

Demographics and social change

Undoubtedly, the pandemic has accelerated our changing approach to work. Technology makes it easier than ever to work away from the office and conduct business across the globe. Future workers are likely to become more mobile, filling talent gaps in emerging markets as western populations continue to shrink.

However, labour shortages and healthcare challenges are issues we'll face in the coming years as a growing number of people hit retirement age in western economies. Indeed, a focus on an ageing workforce and a growing emphasis on diversity - including gender and culture - is rising.

Consequently, we're moving into a time when the traditional model of education, followed by work and then retirement, will become something that looks quite different.

Equality movements such as Black Lives Matter will continue. The protests we saw sweep the globe last year sent a message that was loud and clear. A period of significant social change lies ahead.

Climate change

Climate action has been on the agenda for many years but to be fair, relatively little has been achieved in Australia. However, the pandemic, together with the dramatic weather events we've seen rage across the world, has finally moved it into the spotlight.

Today we're seeing growing global momentum toward net zero-emission targets. Finance and industry now know that changing perceptions on climate make it an issue they must address. Every business must commit to change – consumers and shareholders will demand it.

Countries, too, can't escape the pressure by citizens to up their game. Australia will need to step up to avoid being left behind because, right now, we rank in final place on the United Nations' scorecard for climate action and responsibility.

Technological breakthroughs

In a world where the internet, mobile devices, data analytics, cloud computing, drones, and artificial intelligence have become part of everyday life, there's enormous scope for opportunity.

Technological innovation and digitalisation continue to change our world at warp speed. At the same time, companies are busy understanding how they can apply the new technologies to develop new products and services, so they can deliver on consumer expectations.

A time of significant change

The pandemic has left a trail of destruction across our economies and societies. It's touched every industry, changed politics, and disrupted our culture.

That said, it's important to realise that we've now reached a place where we can rethink and rebuild a world that responds to the challenges we're seeing. But how we move with the changes when the threat of the pandemic passes is yet to be seen.

Rest assured, at Clearwater, our investment managers are always busy keeping track of global megatrends, constantly analysing data, and predicting how to make the most of investment opportunities while avoiding the risks.

by Gary Lucas.