Four Mega-Trends Shaping the World—and What They Mean To You
This week, I wrote a letter to shareholders as part of BlackRock's annual report, and I shared my views on what I see as four mega-trends that are shaping our world. These trends don’t just affect shareholders or investors—they matter to us all. Here’s a look:
We’re Living Longer, But We’re Not Prepared
As I’ve written about on LinkedIn before, one of the defining challenges of our age is longevity and the associated retirement crisis it is helping to drive. People are living longer lives, but they’re not prepared: In the United States, for example, only 40% of Americans take part in any retirement plan. Savings for pre-retirees average just $12,000.
But that’s not the worst of it. In the coming decades, longevity is only going to increase. What does this mean to you? Well, more years to live mean more years to pay for. We all need to save more—a lot more. The old wisdom of putting away 5% a year just won’t cut it in today’s world—people need to be thinking about doubling that figure, or going even further.
Technology Is Reshaping the Jobs Market
Whether it’s a U.S. restaurant replacing waiters with tablet computers or an Indian car factory adding robots to the production line, machines are replacing people all over the world. Exacerbating the problem, many companies can’t find enough workers to do the more highly skilled jobs created by these transitions—programming, engineering, and more.
Part of this job loss is inevitable—but there’s an opportunity here as well. In a global, interconnected economy, jobs will flow to the nations with the best training and education and to the individuals who are seizing on these tectonic shifts.
The Infrastructure Opportunity
As the world struggles with digital pressures, it must also confront a very concrete one: the massive need for infrastructure investment. The World Economic Forum estimates that $5 trillion a year in global infrastructure investment is needed through 2030.
It can be easy to dismiss bad infrastructure as a nuisance on the drive to work, but it’s actually a tremendous obstacle to economic growth. Better infrastructure means that companies can move their goods faster, communicate more effectively, and lower their costs.
Infrastructure projects can also help relieve some of the pressure on workers displaced by technology, since construction requires large amounts of unskilled and semi-skilled labor. And since most governments can no longer afford to self-fund massive infrastructure projects, there is a tremendous opportunity for long-term investors to form crucial public-private partnerships.
Investing Isn’t What It Used to Be
The conventional wisdom used to be that your portfolio should be 60% stocks and 40% bonds. But as the financial crisis proved, that sort of simple breakdown doesn’t work in today’s markets. Stocks and bonds are too tightly correlated—i.e., since they move in tandem, holding both doesn’t necessarily mean you’re diversified. And furthermore, bond yields just aren’t what they used to be.
Reacting to the crisis and the challenge of finding returns, investors are exploring a variety of new strategies—alternative investments, “unconstrained” mutual funds that offer fund managers more flexibility, and low-cost products like ETFs, which track an index like the S&P 500. Many investors understand that they need more income, and they’re taking the steps to find it. As we work together to address the challenges presented by longevity, that’s a lesson we shouldn’t forget.
Whether it’s longevity, technology, infrastructure, or the markets, these trends are all deeply affecting each other—and they will be for years to come. The most important thing is to get out in front of them, and to peel back the surface to see what other major trends will begin to shape our world. I’m sure there are many out there that I’ve yet to even consider.
The opinions expressed are current as of April 2014, are subject to change and are deemed by BlackRock, Inc. to be accurate and reliable. Reliance upon information in this article is at the sole discretion of the reader.
Photo: lixuyao/iStock/ThinkStock
Managing Director, Cherry Bekaert Healthcare TAS
9yWe can invest all we want in environmental conservation, infrastructure, energy, manufacturing, whatever. But if you have an entire population that is unable to absorb the financial effects of business cycles, life events, health care, costs of aging, etc. our productivity as a nation will inevitably go down as more and more economic resources are diverted from otherwise productive spending into public welfare programs, and not just safety net programs.
Managing Director, Cherry Bekaert Healthcare TAS
9yIt is our own lack of personal responsibility that will ultimately lead to the further socialization and increased dependency on government for our personal welfare. That's not a political statement, that's a math problem. My generation on average saves less than 3% of their income. If an entire generation then ages and has no savings, then what entity will they look to for support? I hope we will wake up and realize that it will be more our collective personal choices that ultimately determine our country's financial future more so than political agendas.
President at Irvine Land Trust
9yNot a single word on the environment, global warming, climate change, not single word on the acidity levels in the oceans, the recent UN report on desperate need to stop burning fossil fuels. Not a single world on water scarcity across the globe, none of this deserves to be in this list of global -mega trends?
Fill in the hole to make the team Whole!
9yAs stated earlier "There is nothing new under the sun, trends are always flowing, but now so are the ice caps!!! That New Infrastructure where and how will it be designed assuming the sea level does rise!!