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10 investment themes set to dominate the 2020s

12 November 2019

The megatrends fuelling social, environmental, political and economic challenges are likely to reach their boiling point in the 2020s, according to Bank of America Merrill Lynch.

By Rob Langston,

News editor, Trustnet

The next decade is likely to see existing paradigms overhauled, further disruption of business models and new trends that will shape the future, according to analysts at Bank of America Merrill Lynch, who warned that markets will face new challenges “unlike anything we have seen in the past”.

Another billion people will put huge strains on resources while the ageing demographic will put strains on healthcare and pension systems, they noted.

Meanwhile, the planet could reach an “irreversible tipping point” by the end of the decade as global temperatures increase.

As such, the 2020s will be the decade of ‘peak’, the bank warned: peak globalisation, peak inequality, peak youth, peak oil, peak cars, and peak stuff.

Below Trustnet takes a closer look at the themes likely to shape the next decade.


Peak globalisation

First on the list is peak globalisation, which the bank’s analysts consider as the end of unrestricted free movement of labour, goods and capital around the world.

“The moment of ‘peak globalisation’ is likely behind us,” they said. “The 1981-2016 era of unchecked flow of goods, people and capital is coming to an end, catalysed by the widespread recognition that while globalisation has meant lower consumer prices, it has also meant slower growth, precarious employment and social disruption.”


The number of physical barriers has increased and unconditional birth right citizenship is only available in the US. In addition, the global trade growth has fallen below global GDP growth for the second time since the financial crisis “a rare event outside of a recession”.

“The disruption of the flow of goods, people and capital will have profound implications for global supply chains, labour markets, interest rates, and corporate earnings over the next decade,” said the bank’s analysts.

“Initially, it will mean rising costs of business as big regional powers attempt to dominate local geography and natural resources, and exercise tighter controls over currency and financial markets.”

Quantitative failure

The next theme is ‘quantitative failure’ and the belief that monetary policy measures are proving less effective at booting corporate and household ‘animal spirits’.

“Quantitative failure, or monetary policy impotence, refers to diminishing returns from increasingly activist central banks & their use of monetary policies to reflate the economy,” they said.

“Since the global financial crisis, central banks have pursued a series of extraordinary monetary policies to bolster inflation & growth; quantitative easing, yield curve controls, zero interest rate policies, negative interest rate policies and excess liquidity.”


However, central banks could start to run out of tools to fight any further economic downturn.

“If central banks are ‘pushing on a string’ monetary policy alone will not starve off recession risks or populism,” the bank said. “Instead of easing financial conditions, central bank interest rate cuts will only compound issues.”

Such quantitative failure has already been seen in Europe and Japan where households and corporates are saving more not less as debt is repaid and banks tighten lending criteria.


With several indicators already starting to flash amber over an imminent global recession, the bank believes the biggest vulnerability comes from the bond market bubble.

“In the coming years a policy mistake – inflation targeting/Modern Monetary Theory) and/or the start of policy impotence (central banks pushing on a string) will likely cause a jump in interest rate volatility, end the decade-long bullish combo of minimum rates-maximum profits, and signal the big top in asset prices,” said the analysts.

“A disorderly rise in bond yields would likely cause extreme pain as Wall Street deleverages, inevitably leading to pain quickly thereafter for the real economy.

“This is why the Fed policy pivot on weak credit markets was so aggressive in December 2018/January 2019.”


With the global population set to grow by another billion people a demographic change is also likely, having reached ‘peak youth’ as the population continues ageing.

“In the 2020s, the world will experience ‘peak youth’ for the first time in human history, with the number of persons aged 65+ expected to outnumber children under five,” the analysts said.

“Life expectancy is rising rapidly thanks to technology and better lifestyles, and has been one of the most remarkable demographic stories of the past century.”


As such, immortality might provide an interesting secular theme with innovations in a number of areas helping people to live healthily past the age of 100.

In addition the rise of the middle class in emerging markets is also likely to have a profound effect ton markets in the next decade as households seek to spend more money on consumer durables and services.

Climate change

The Bank of America Merrill Lynch analysts warned that an inflection point might be reached by the end of the decade, although awareness of climate change issues is building.

“The UN predicts that the 2020s will be critical to limiting global warming to the 1.5 degrees Centigrade pre-industrial level by 2030 - the temperature above which academics believe climate change will cause lasting environmental damage,” they noted. “A rise of just 4 degrees would be enough to submerge 600mn homes due to rising sea levels.”


The rising technological rivalry between China and the US could lead to a bifurcation in standards by the end of the decade, driven by divergence in rules and standards.

“In the next decade, we continue to see the US and China competing in ‘nextgen’ technologies like quantum computing, semiconductors, AI, 5G communication networks, cybersecurity and space that go well beyond manufacturing and trade issues,” they said.

“This seismic shift in the global supply chain seems structural, and we see a likely formation of a dual tech ecosystem, one for China and one for the rest of the world.”

Moral capitalism

Another trend likely to accelerate in the 2020s is moral capitalism as it shifts away from shareholder supremacy towards greater involvement of stakeholders.

The bank believes that around $20trn of assets under management – representing another S&P 500 – will go into environmental, social & governance (ESG) strategies over the next 20 years.

Robots & automation

According to the bank, up to 800 million jobs – around 50 per cent of the total – could be at risk of replacement through automation by 2030-35, giving rise to the next trend of the 2020s.


“Better computing and artificial intelligence are driving improvements in many diverse areas such as optical sensing, machine vision, voice recognition, environmental sensors, motion actuators and touch/haptics that are set to take robots and automation to the next level, opening up new possibilities and job risks,” said the analysts.

“Furthermore, demographic issues such as ageing and restrictions on immigration as well as trade tensions (trade wars, tariffs) also support a move towards more robots & automation.”

Smart everything

Technological advances are also likely to lead to the rise of “smart everything” with the number of devices connected to the internet set to rise from 30 billion at the start of the 2020s to 500 billion by the end of the decade.

The trend is likely to be driven by rising urbanisation as well as new solutions to urban problems such as smart buildings, infrastructure and communications.

Nevertheless, there will likely be a battle with ’peak privacy’ as the integration of smart technology into society makes it difficult for people to retreat. While some may sacrifice privacy for better experiences and outcomes, legislation will likely aim to protect privacy and improve data governance.

“As a result, while we do expect privacy to impact companies in the short run, as regulation increases the risks from data misuse that impacts profitability,” the bank’s analyst noted.


A new space age driven by commercialisation by private companies is likely to enable “humanity’s lift-off from Earth”. New technologies will help fuel the burgeoning space tourism industry and contribute to the growing nanosatellite industry as governments spend more on space.

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