Megatrends: An introduction to long-term thinking
Megatrends are transformative economic drivers in sectors undergoing rapid innovation. They often offer solutions to urgent societal challenges. We believe that the energy transition, artificial intelligence, next generation medical breakthroughs and socially responsible investing represent drivers of economic change that may provide exciting opportunities for long term investors.
This year has been a difficult one for investors, especially when put in context of the relatively solid returns of the last few years. While we had a very rapid and deep recession in 2020, the recovery also occurred extremely fast, meaning that the angst suffered by investors passed quickly. The bear market we have endured so far in 2022 has been more traditional, with a slow march downward, broken up by positive weeks here and there giving us hope. The effect is that this tends to weigh more heavily on the psyche of investors. We have written about the difficulties of investing through these times over the past couple of newsletters. However, in recent weeks some reports have started to show signs of capitulation which commonly coincides with the market bottom, suggesting there are reasons for long-term optimism.
The Energy Transition:
Socially Responsible Investments:
It should be noted that there is a great deal of overlap between the above four megatrends, and we believe that the lines between economic sectors will continue to blur in the coming years. While we expect that the above sectors will continue to grow throughout the 2020s, that is not to say that all the companies in these fields will benefit equally, inevitably there will be some companies that exceed expectations, while others do not last. This is why we believe that a role for active investment strategies will remain important in future financial portfolios.
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