Trends that are shaping the future

You should be aware of these six trends for the 2013 investment year.

Euro crisis Euro crisis

Investors should not be too quick to write off the Eurozone. There are four good reasons why the currency union will remain for a long time to come.

Firstly, the economic costs of a euro area breakup would be huge. Secondly, the political costs could be even greater. Thirdly, steps toward integration have already been taken, and these will be very difficult to reverse. Finally, fears over a loss of sovereignty are misplaced; in fact, the euro countries already gave up a significant part of their economic sovereignty some considerable time ago.

Aging demographics Aging demographics

The rising age of the global population not only creates risks, but also presents opportunities for investors.

However, one thing is clear: the world's aging population - especially in China and industrialized nations such as Japan and Germany - will likely be accompanied by great changes in economic growth, politics and investment behavior.

Deleveraging Deleveraging

At present, many industrialized nations are learning how to save the hard way. This is likely to result in volatile economic growth and increased risk of recession in the future.

Deleveraging is painful for both the private and public sectors, but the worst pain can be avoided if the two processes are not carried out at the same time.

Global rebalancing Global rebalancing

The rise of the emerging markets has led to economic imbalances. A new balance could be achieved if emerging economies increased levels of consumption and reduced exports.

Emerging markets are in solid financial shape: healthy GDP growth has cut the debt ratio in these economies to such an extent that in many cases their government bonds are now considered to be safer than the paper issued by developed peripheral nations in the Eurozone.

Asian currency flexibility Asian currency flexibility

An increasing number of Asian countries with strong exports are beginning to allow their currencies to appreciate against the US dollar. Investors can use this information to their advantage.

From an investor's perspective, it is well worth monitoring the current accounts, inflation rates, currency reserves, domestic demand and macroeconomic policy of the Asian exporting nations. If investors try to anticipate changes and seek out misvaluations in the forex markets, they can achieve gains by taking positions in the currencies of export-oriented countries.

The end of the commodity boom The end of the commodity boom

It is becoming increasingly apparent that the commodity boom of the last ten years is coming to an end. Nevertheless, commodities still present opportunities for investors.

Investors should bear in mind that a number of key commodities exceeded their peaks in the current cycle a long time ago. The prices of aluminum, nickel, zinc, natural gas, oil, iron ore, coking coal and thermal coal are all below their cyclical highs by various margins.

Economist Insights

Economist Insights

Economist Insights is a weekly publication dealing with current economic issues.



Research is a fundamental component of our investment process. See below for a selection of publications on market trends, our assessments and special investment themes.