The Age of Disruption
Running out of Freshwater
Electrification of Everything
Mean Reversion of Wealth-to-GDP
The End of Debt Supercycle
Rise of the East
Declining Spending Powers
of the Middle Classes
Retirement of Baby Boomers
THE END OF INDEXING?
The End of the Debt Supercycle
< VIEW MEGATRENDS
70 years of debt accumulation has come to an end – at least in the private sector in developed markets – as capital that really should be employed productively is increasingly used to service existing debt, and that holds back productivity gains and economic growth.
The story is somewhat different in emerging markets. Debt continues to rise there almost as if 2008 never happened, with China being the main culprit. As the world’s central banks are all keen to see their currency remain competitive, there is a substantial risk that they sit on their hands when they really should take firm action.
This could potentially result in significant inflationary pressures, in particular if the country in question has a low output gap. Amongst OECD countries, the US is our no. 1 candidate to experience inflationary problems in the foreseeable future.
The end of World War II brought with it the biggest baby boom ever experienced; now the oldest baby boomers have begun to retire with 150 million expected to do so across the OECD over the next 15 years.
When the largest cohort in the history is exposed to these forces at the same time, the effect is profound as spending patterns change. Older people, for example, spend less on certain items (e.g. clothes) and more on others (e.g. restaurants), and once retired they also tend to move to smaller homes and they drive less in their cars.
Changing demographics also directly affect financial markets as demand for income increases, causing a structural shift in demand away from equities towards bonds and other forms of ‘alternative’ income. This is driving yields further down, leading to a growing headache for pension funds which are struggling to fund their pension obligations.
VIEW MEGATREND 3 >
Declining Spending Powers of the Middle Classes
VIEW MEGATREND 4
Workers in many countries have not experienced any meaningful growth in real wages for a considerable amount of time and low or no real wage growth negatively affects aggregate demand and partly explains why economic growth is so low everywhere.
However, it also affects politics. Voters in both the UK and the US voted for something to change when they voted for Brexit and Donald Trump respectively, and other countries may follow in their footsteps. The growing dissatisfaction amongst the world’s middle classes will almost certainly affect the world around us in the years to come.
SUBSCRIBE TO NEWSLETTER
Turpis dis amet adipiscing hac montes odio ac velit? Porta, non rhoncus vut, vel, et adipiscing magna pulvinar adipiscing est adipiscing urna. Dignissim rhoncus scelerisque pulvinar?
As with our motto, “always count”, we test and verify everything. Each month we conduct more than 30 different detailed investment manager peer group GraySwan ScoreCards. Every report encapsulates more than 30 pages of performance and risk related statistics and form part of various quantitative reports, which we use as an initial screening methodology in our investment manager research process.
Please be aware that there is currently a WhatsApp group and messages phishing attack using GraySwan Investments name. Neither GraySwan Investments, nor any of our staff, are linked to these activities. We do not conduct business via WhatsApp. Please do not engage with them or pay any money into their bank account/s.