I was asked a couple weeks ago what my expectations were for stock markets for the next decade.
My response was to look back over the last 10 years to look for the “investment themes” that have dominated investor’s interest, as this could give us a clue going forward. I have concluded this decade has been one of change, disruption and innovation.
Over the last 10 years global interest rates have fallen from about 5% to virtually zero with inflation remaining around 2% per annum. Political austerity and geo political tensions have been dominating the news and this may change after 2024. With this, we have had stagnant productivity and wages but have achieved strong employment. Property prices have increased and so have global stock markets (MSCI world index +103%). Changes to regulation as far as compulsory employers pension schemes as well as the way we can take our retirement benefits have created greater focus on pensions. We are now experiencing record life expectancy with more people reaching their 100th birthdays each year.
History has a habit of giving us an insight towards the future as far as stock markets go. The key word is “Innovation”. What started as a “pipe dream” tends to become a reality and here are a few examples.
The car industry has become revolutionised beyond all recognition. There is more technology in our cars these days in just the last 10 years alone, from moving from petrol/diesel driven vehicles to hybrids and electric cars. We have come a long way since Clive Sinclair developed the first electric car in January 1985.
Your mobile phone has had new features added over the last 10 years from having greater storage of data, high resolution cameras and much more. We are now having greater access to everything and, can visually communicate with family and friends anywhere in the world.
Medical science and surgical procedures have invested massively in new technologies to help with the early detection of illnesses and, extensive advice on prevention and quicker recovery rates certainly aid life longevity.
Anyone who remembers Stanley Kubrick’s classic film 2001: A Space Odyssey from 1968 will recollect that it was about the start of Artificial Intelligence. 40 years on, you now have “Alexa” in your home. This is still a relative new science and one which will continue to grow.
The change to our climate is starting to gain momentum and has raised real concerns. Global leaders are committed to become carbon neutral within the next 30 years and, this I believe is a massive area for investment. Renewable energy strategies aided by new technology will create new opportunities for innovation and employment.
My advice to anyone is to “stop listening to all the noise” and focus on your own individual objectives and timescales. Global stock markets will rise and, occasionally fall during a decade. This is what history has told me for almost five decades. What drives stock markets is simple – companies that achieve greater productivity will usually generate greater cash flows and, in turn this can lead to increasing profits and result in greater dividends for investors. Re-investment of income generated from dividends creates personal wealth.
Using the services of a Financial Planner such as Richmond House can help you to identify your objectives and, provide strategies that will help towards your goals. Further, they can advise you on the progress of your plan on an annual basis.
I wish you all a Merry Christmas and I look forward to sharing my thoughts with you in the new decade.
Nigel Taylor Cert PFS, Dip FA
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