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Megatrends
Megatrends are transformative forces that have a deep, profound impact on the future of the global economy. Taking years or even decades to take root, megatrends often reshape the way societies live, work and play. They can bring about revolutionary changes that birth new industries or disrupt existing ones.
Megatrends can offer compelling investment opportunities. Investors should get ahead of the curve by positioning their portfolios to capture the growth benefits offered by these long-term structural changes.
Technology-enabled Transformations
Technological advancements and breakthroughs are driving accelerated growth and transformation across all sectors of the global economy. To survive disruptions, businesses will need to embrace innovation-driven growth or risk being left behind.
The deployment of smart solutions will also be instrumental in the world’s journey towards a sustainable future. These would include the development of clean, renewable energy to tackle climate change and lower carbon footprint. Leveraging on technology will help to drive the circular economy so we can reduce, repurpose, and recycle as much as possible.
Changing Demographics and Consumption Trends
Changing demographics are leading to shifts in societal values and consumer behaviour, impacting generational spending patterns. The increasingly-affluent middle class in developing economies will spur demand for better-quality, aspirational goods and services. Meanwhile, the growing silver generation will spend more on healthcare-related goods and services.
As a generational shift takes place, companies will also have to reorient their strategies and priorities to cater to more digital-savvy millennials who also value sustainability and social responsibility.
The Shift in Global Economic Power
The strategic rivalry between the leading super economies of this century—the US and China—will set the stage for a battle for technological supremacy, spurring innovation as both countries ramp up their technological capabilities.
Given their size and economic dominance, the US and China often exert influence over regulatory frameworks, economic policies and market dynamics in other countries. The breadth and depth of their financial markets provide an opportunity for investors to pursue returns on both sides of the spectrum as part of a diversified portfolio.
Investing in the Future of Healthcare
One in six people on this planet will be 60 and above by 20301. This age bracket will account for almost a fifth (22%) or 2.1 billion of the world’s population by 2050, while those 80 years and older are expected to triple to 426 million.
This demographic shift will not only be a dominant trend but also a highly sustainable one, given that healthcare consumption generally rises sharply with age. Global healthcare needs and costs per capita will rise across all borders (Figure C1), with emerging markets expected to see the most disproportionate increase due to rising income levels1. Meanwhile, structural changes in healthcare delivery, as well as innovations in medical fields, will hasten the transition already taking place.
Figure C1. Global healthcare spending is expected to continue rising in the longer-term.
Source: University of Washington, September 2021. Data past 2018 are forecasted.
For instance, there has been an unprecedented pick-up in the pace of both new drugs discovery and approvals that include anti-viral, antibody treatments and vaccines in response to the recent pandemic challenges2. Smaller and nimbler drug companies driving new discoveries have seen multiple-fold increases in their stock valuations.
Advances in medical technology and diagnostics tools—including the use of artificial intelligence (AI), robotic surgery and developments in telemedicine, point-of-care diagnostics, and new consumer apps and wearables that help to track blood pressure, heart and respiratory rates—have also been becoming more widespread3. New and novel treatments such as gene treatment in cancer therapies are also becoming available, while quality of life will be enhanced by new techniques, including implants of medical aids such as exoskeletons that enable elderly mobility4.
Challenges for stakeholders will include the need for sustained efforts to manage healthcare costs to ensure access to good quality healthcare is appropriate and affordable5. Awareness of such demographic and innovation trends would be helpful for investors who wish to diversify their investment portfolios.
Asian Millennials’ Rising Purchasing Power
About 50% of global demand comes from private consumption, with two-thirds of it from middle-class households – the fastest-growing segment in the global economy and projected to reach 5.3 billion by 20306 or about five consumers added per second6 (Figure C2).
This trend is buoyed by the rapid growth in per capita income from emerging markets, expected to outpace that of developed nations over the next five to 10 years. The new middle class will be predominantly Asian (88%)6 and spread across China, India and Southeast Asia (Figure C3). By 2027, China alone will likely account for a quarter of the global middle-class spending in high-quality consumables, as well as home and car purchases7.
Figure C2. Middle-class households will dominate consumption in 2030.
Source: Projections by World Data Lab.
Figure C3. 88% of the next billion entrants into the middle class will be in Asia.
Source: The Brookings Institution.
Millennials currently make up the lion’s share of the middle class (60%)7, with China expected to surpass the US by the early 2030s. This reflects the immense shift in spending power from West to East over this period. For example, online sales for Singles Day in China exceeded $58 billion in 2019, higher than the combined sales of Black Friday and Cyber Monday in the US8.
Consumption trend intact despite rising inflation
Concerns that inflationary pressure will dent private consumption have risen, with the Ukraine-Russian conflict causing global energy and food prices to go up. Despite the fears of higher inflation, US retail consumption has remained robust in furniture, sporting goods, automobiles, general merchandise and online sales, in part due to the huge excess savings accumulated over the pandemic9.
Inflation rates in Asia have historically lagged the US with less discernible impact on middle-class growth. In China, the impact of inflation from imported goods and services is softened by state policies focusing on domestic consumption and China’s Common Prosperity strategy. These will continue to swell the ranks of the country’s young and tech-savvy middle class—a formidable driving force behind future middle-class consumption patterns—as China leads in the e-commerce space.
Towards a More Resilient and “Moo-vable” Feast
The world’s population has more than doubled from 3.5 billion to about 7.6 billion over the last five decades and is projected to rise to 9.7 billion by 205010. Food production will need to be much more efficient. Food supply chains are also vulnerable to disruption, as seen during the Ukraine-Russian conflict with the two countries accounting for about 29% of global wheat exports11.
Figure C4. Cultivated meat has fewer environmental and ethical issues than farmed meat, and prices will eventually fall when production is scaled up.
Source: Four Paws International. WHAT IS 'CULTIVATED MEAT'? (2020).
Adding lab-grown or cultivated meat to the global menu is one way to enable more efficient and less wasteful food production. This is because it is less affected by seasonal and economic cycles. It also addresses multiple environmental and ethical issues, ranging from greenhouse gas emissions and deforestation, to the use of animal antibiotics in traditional farming methods. While seemingly costly today, prices will eventually fall with the scaling up of production based on Moo’s Law12.
Alternatives to greater sustainability in energy and transportation
Similarly, the Ukraine-Russia conflict has exposed weaknesses in global fuel supply. Sanctions imposed on Russia have resulted in elevated oil prices that will likely stay high for the rest of 2022.
More countries will look to reduce their reliance on Russian energy. According to the International Energy Agency (IEA), European Union (EU) countries imported about 155 billion cubic metres (bcm) of Russian gas in 2021, accounting for about 45% of EU gas imports that year13 (Figure C5). Some 60 bcm may be replaced by the year’s end from other countries, including the US and Qatar14.
New kinds of transportation, such as electric vehicles, can also lower energy needs and costs, especially when production costs fall because of rapidly improving technology and rising demand. Such shifts towards greater resilience and sustainability in food, energy and transport will likely result in changes in the investment landscape and opportunities for investors – especially if these trends overlap or converge in the future.
Figure C5. Russia: largest natural gas supplier to the European Union (EU).
Source: European Commission.
- 1World Health Organisation (WHO) October 2021.
- 2Approvals by US Federal Drug Administration (FDA) in 2021: Fierce Pharma News Jan 2022.
- 3Insider Intelligence April 2022.
- 4Neoscope Dec 2019.
- 5Ministry of Health (Singapore) November 2020.
- 6Brookings Institution 27 July 2017 A golden age for business? Every second five people are entering the global middle class.
- 7China’s Influence on the global middle class: Global China October 2020.
- 8McKinsey & Co: China consumer report 2020: The many faces of the Chinese consumer.
- 9MRB Report 21 April 2022.
- 10United Nations: World Population Prospects (WPP) December 2019.
- 11Wheat hits 14-year highs as Russia-Ukraine conflict curbs supply. Reuters 7 March 2022.
- 12Moo's Law: An Investor’s Guide to the New Agrarian Revolution by Jim Mellon.
- 13A 10-Point Plan to Reduce the European Union’s Reliance on Russian Natural Gas, IEA, March 2022.
- 14Joint European action for more affordable, secure and sustainable energy: 8 March 2022.
