A defining decade? What the world will look like in 2030
The world is changing at an unprecedented pace, with new technologies, climate change and the rise of Asia coming to the forefront of investor consciousness. Here, Senior Adviser Ian Howard looks at the key areas to keep an eye on in the decade ahead, and the importance of investing for the long-term.
As we embark on a new decade, thoughts are turning to what our journey through to 2030 will look like. Following on from the last couple of years, it is set to be a disruptive decade – and, as investors, it can be all too tempting to react to events as they happen. However, uncertainty is part and parcel of investing, and there are ways to manage it and make the most of the available opportunities, by keeping a close eye on continuing trends and building a portfolio that will be well positioned for the long-term.
Here, I take a look at the key themes that are set to shape the world – and the world of investment – this decade:
- Technology takeover
The 2010s were defined by tech-driven change – the decade has unsurprisingly been dubbed the ‘Fourth Industrial Revolution’. We hit several sci-fi ‘landmarks’, including the flying cars of Blade Runner and Marty McFly’s hoverboard. While the proverbial crystal ball doesn’t foresee an imminent robot uprising, technology is set to continue to be a major driving force in the global economy: in the workplace, healthcare and alternative (sustainable) materials.
Here are some of the World Economic Forum’s predictions for technology milestones that will occur by 2025.1
Driverless cars, a robotic pharmacist and the first AI machine on a corporate board of directors all feature on the list – reflecting experts’ belief that artificial intelligence (AI) will transform human society in the coming decade.
Such automation brings both benefits and challenges – it can improve lives, but also threatens jobs. We already have smart heating and voice activation, but by 2030 the scope will be much wider, creating smarter homes, offices and cities. But, as cybersecurity specialist P.W. Singer warned the New York Times: “the transition to an autonomous, always-watching-us internet of things will be bumpy.”2 Indeed, our world will become less private, with more and more information collected on every person, product and organisation.
- Climate: changed?
2030 might indeed be D-Day for the earth – in 2018 the UN warned that humanity has 12 years left to avoid catastrophic climate change. That means that by 2030, we’ll need to take big steps to cut global greenhouse gas emissions to curtail the negative impacted by climate change, including extreme weather events, rising sea levels and, most recently, the terrible bushfires in Australia.
Investment decisions in the coming decade are, therefore, likely to be increasingly driven by our climate as the 2020s present the opportunity to use investing as a force for good. Technology is set to be a huge driving force in ending the reign of plastic – with materials technology creating alternative ways of containing liquids and solids that will be environmentally friendly. Other areas to watch are the rise of plant and cell-based meat (which has proven that there’s a multibillion-dollar market for sustainable ‘meats’) and the emergence of small nuclear reactors (despite concerns over safety, the UN and many experts say fission energy will be key to hitting our climate goals).
Forecasts suggest the world’s population could reach a staggering 8.5 billion people by 2030 – that’s triple the population of the early 1960s.3 Moreover, India will have overtaken China as the most populated country on Earth, and Nigeria will be on its way to overtaking the US in third place.
One of the most pressing demographic-based challenges for investors is the rapidly ageing population and the prospect of a 100-year life. The fastest growing demographic will be the elderly: the population of people over 65 years old is set to hit one billion by 2030.3 In 2014, the Queen’s centenarian letter-writing team were forced to expand following a huge jump in numbers living to 100. This will raise questions around the ‘right’ age to retire and how we are going to build up our pensions to last after retirement.
This ageing population can offer select investment opportunities and the strain between the old and new world will also determine national economic prospects, as the electoral power of the ‘grey vote’ in retirement states comes to the fore.
Longer life expectancies are partly influenced by developments in healthcare, which are set to develop further in the coming decade.
The advancement of technology is also set to revolutionise medicine, with a basic cure for cancer, diabetes and malaria expected by 2030. What’s more – genomics will advance early diagnosis, Nanobots (programmed DNA strands that can enter your body) will locate cancerous cells, and AI will be able to offer early prognosis for common conditions such as the flu.
The next decade will see a boom in the world’s output of human genetic data, with the Global Alliance for Genomics and Health (GA4GH), estimating that over 60 million patients will have their genome sequenced in a healthcare context by 2025.4 Not only that – as Money Observer predicts – we may finally overcome organ shortages for transplants, with companies developing technology that can replicate the tissue structure of key organs.5
Heading into the 2020s, investors cannot underestimate the rise of a China-centred Asia and the power it holds in changing huge parts of the world. China has enjoyed what the World Bank called “the fastest sustained expansion by a major economy in history” earlier in the year (see below graph) and over the next 10 years, China will overtake the US and become the largest economy on earth.
Consumer markets will be driven by vast population growth in Asia – the Brookings Institution conducted a study concluding that between 2015 and 2030 global middle classes will grow by about 2.4 billion. Of this 2.4 billion, 88% will reside in Asia.
A population of this size will undoubtedly have considerable influence on key market drivers and trends – as investors, it is clear we have to be thinking about Asia.
- Debt is the decider
Debt defines our society. The concept of capital is based on debt and it is a driver of major investment decisions – even if negative interest rates prevail, rising debt will continue to haunt the old world as we journey into the 2020s.
The primary challenge for debt investors is creating a fixed-income portfolio when bond yields are negative. Looking to the next 10 years, emerging market debt could fill this gap, with capital continuing to flood back into the asset class after a strong performance in 2019.
However, the battle for global hegemony between the US and China may herald an era of political risk for emerging market debt. According to a recent Congressional Budget Office forecast, US national debt is projected to rise to $31.4 trillion by 2030 – an amount equal to 98% of GDP and the highest since the end of World War II.6
- Life on Mars?
The golden era of space exploration may be a distant memory; however, NASA and Elon Musk are planning big things for the next decade. The former is planning a crewed mission to the moon in 2024 – Artemis III – to lay the foundation for a permanent human presence and create a launch point for travels to Mars. On that subject, Elon Musk’s has long held a goal to travel to the Red Planet, and he wants to make it happen this decade. Musk’s ambitions have risen to include a fully fledged Mars colony (last year he presented the rocket that could make that happen!).
Playing the long game
As we have seen, over the next decade investors will face a myriad of risks and opportunities as they navigate an ever-changing world. It is important not to react to short-term events but to look at long-term trends – Asia, Asia-focused businesses and new technologies are likely to drive investment opportunities over the next 10 years, whereas old energy, old tech and regions hit by climate change could be left trailing behind. Furthermore, rising longevity is undeniably a big challenge facing our society, but it is one that can be managed with foresight and careful planning.
Planning long-term might lack the “excitement” of responding to every news headline and market turn, but it will enable you to keep your eyes focused on the horizon, as you look to achieve your long-term financial goals – this is where a financial adviser can help!
If you have a question about investments or future planning, or would like more information about my services, please contact me on 01444 848508 or via email at Ian.Howard@sjpp.co.uk.