Long-term investing in an age of uncertainty
- The UK election result reminded investors of the unpredictable nature of politics. Economic data has become more uncertain; data releases are revised more often and with larger corrections than in the past. The fourth industrial revolution – a daunting combination of robotics, the virtual economy and artificial intelligence – will radically alter the way the world economy operates. Environmental constraints on growth are a modern economic reality, causing the structure of economic activity to change.
- Given such uncertainties, why should investors consider long-term investing? Because long-term investing tries to identify trends investors can be relatively certain about in increasingly uncertain times. UBS identifies three trends that we believe will shape investment over the next ten years and beyond. The ageing global population will change consumption patterns and how labor forces operate. The increase in global population will add to existing demands on natural resources and increase the importance of efficiency. Continued urbanization in emerging markets will change patterns of demand and social structures.
- Focusing on these themes gives investors a framework in which to think about longer-term investing. Investors still need to react to shorter-term events, but they can measure their decisions against higher conviction long-term views.