Share Prices & Company Research

Press Release

14 September 2018

Emerging global themes

Investing in equities is a challenging business today. We have seen enormous changes to the way that companies can successfully do business over the last ten years, although some industries have been more affected than others. In this relatively brief period in history, the ways in which marketing, sales and commerce in general are successfully executed have, arguably, seen the most significant changes for generations. We all know, recognise and probably buy from the big disruptors of our time; however, the pace of change is unlikely to slow and many of the names we recognise today may not exist in a meaningful way in 10 or 15 years’ time.

Over the long term, many commentators cite two significant factors as the main influences for change; namely, the challenges and opportunities presented by the world’s demographics and the pace of technological change as predicted by Intel co-founder Gordon Moore in 1965.
Forward-looking investors cite the ‘old economy’, characterised by fossil fuels and labour-intensive processes, traditional manufacturing, high-street retail and shorter retirements as themes that are in structural decline. In contrast, themes that characterise the evolving economy include broad areas such as automation, clean technology, urbanisation, artificial intelligence, e-commerce and financial technology. Moreover, ageing and related lifestyle needs will present business opportunities as life expectancies lengthen around the world.
Lower birth rates and increased life expectancy are expected to result in the global share of the 60+ age group increasing to 21% by 2050 from 9% in 1990. At present, over-55s account for around half of healthcare spending and the aforementioned increase in life spans represents opportunities for consumer businesses as two-thirds of consumption in developed markets is derived from over-60s.

Furthermore, although the internet seems to be everywhere already, the digital era is still in its early days. Only 9% of global retail sales are completed online and e-commerce is expected to grow at an average rate of 14% per year over the next five years. Generation Y (also known as millennials) are now approaching their peak spending years and rather than browsing the shops on the high street they have grown up with the internet and online shopping is their natural channel.
These factors paint an optimistic picture for businesses operating in this wide and growing space. Automation is expected to drive efficiency as robotic technology advances, enabling robots to conduct more delicate and sophisticated work to drive productivity forwards. The costs of robotic equipment are falling while, generally, labour costs are on the rise. This presents a challenge for certain industries where jobs could be replaced by automation.
Here in the UK, the Trades Union Congress have lauded the idea of a four-day working week which may be achievable thanks to advances in automation. Such a dramatic change would present further opportunities for increased leisure time. Clearly these themes are set to develop over the years to come and the long-term sustainability of businesses should always be considered. Not all businesses can claim to have that desirable ‘economic moat’ around them.
Nicholas Thompson, Investment Executive

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Emerging global themes
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