There’s a new world in the making: Demographics, economics, attitudes and technology will be in flux for the next couple of decades. I call the economic and demographic factors changing the world Economorphics.
Here are six trends that will impact markets.
1. The fight to be the next Wrigley’s gum
More people are becoming middle class, just as they did in 1920s North America. The companies who grabbed newly affluent Americans in the ’20s, as Wrigley’s did, were still market leaders decades later, research by McKinsey shows. So when you pick companies, look for ones scooping up the new middle class.
2. Get used to the Victorian gown economy
North America won’t benefit from an expanding middle class like other countries will. Instead, its economy is resembling a Victorian ball gown: it has generous proportions on top and bottom, and it’s tiny in the middle. That means companies can cater to either price or luxury; yet some firms are still casting about for the vanished middle class. When picking companies, make sure you choose ones that know which part of the ball gown they’re tailored to.
3. Commodities will keep you up at night
Oil’s ups and downs on the market, rising food prices and gold’s decline: commodity prices likely keep you up now anyway. But over the long term, prices will rise. After all, we have more people on the planet, and those people have more money. They want to stay warm, keep cool and eat meat. That means more demand, but not necessarily in an orderly pattern.
4. An era of ladies first
Women are earning and inheriting more than ever, so they’ll be managing ever-bigger portfolios in their later years. That means a bigger role as decision-makers at work and at home. When Millennials form families, they might want the higher earner to work and the lower earner to stay home – and it will be increasingly likely that mom will be earning the bigger bucks.
5. Marissa vs. Richard and the fate of commercial real estate
It’s possibly the biggest business decision of the next decade: do companies embrace telecommuting to pare back the cost of real estate? Or reject it since out-of-sight employees could be catching up on soaps? Yahoo CEO Marissa Mayer ordered everyone back to the office, but Virgin CEO Richard Branson calls that old-school thinking. If companies side with Sir Richard, commercial real estate patterns will change.
6. The bear market is here to stay
If the demographic signals are correct, expect a few more years of low returns. After all, boomers will be getting past their highest savings years, and will be increasingly wary about having money in equities. Millennials will not be making up the difference either. That’s mostly good news if you’re a financial advisor, because your skills will have a chance to shine.