A few obvious lessons stand out for investors who are now searching for the big investment themes of the 2020s. One is that big, multi-year bull markets tend to centre around positive ideas, such as exciting new technology or rising consumer wealth.
There are exceptions such as the 1970s, where inflation and supply shocks favoured energy, commodities and gold, but these are in the minority. Another is that a boom normally turns into a bubble and then a bust.
To profit from big trends, you need to find a compelling story, be willing to let your winners run, but avoid becoming a true believer who can’t sell when the end comes. So let’s consider a few contenders. The obvious one is artificial intelligence (AI), which clearly fits the pattern of previous themes. Valuations look rich, but we know that big trends can keep running for years despite high prices.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Instead, the bearish case is that big tech is investing a vast amount and it’s not clear if the returns will justify this. We should be alert for signs that the cycle is coming to an end.
Potential investment themes of the decade
After Covid, I thought healthcare might be the next big broad theme. This hasn’t happened, but the profitability of the GLP-1 agonists (Wegovy/Ozempic and Mounjaro/Zepbound), which may help tackle many conditions beyond obesity, might attract more interest in the sector. The difficulty is that opportunities for other breakthroughs abound, but competition is tough and there is more scrutiny of prices. It doesn’t feel like there is the rising tide to lift all boats that characterises a big theme. Investors need to find the successful innovators within the wider sector. Good for stock-picking, awkward for tracking an index.
Supplying the world’s energy needs while cutting carbon emissions will be a huge task. Profiting from the transition may be hard, because many ideas will be dead ends or not profitable (note Shell pausing construction of a huge biofuel plant in Rotterdam this week, or Ørsted writing down two wind projects in the US earlier this year).
I tend to think the obvious yet still not fully priced-in implication is the resources (eg, metals) that the electric economy will need. This makes a bullish case for some commodities. Many emerging markets look cheap enough to deliver good returns, but I wouldn’t bet on a broad mega-boom like the 2000s.
Today’s world is different: global tensions provide less support for upbeat stories of convergence and cooperation. The most likely emerging-market theme I can see is India. It’s already gone a long way, it’s not cheap and has plenty of room for error. But it also has unique potential for domestic catch-up growth on a vast scale.
Whether any of these will stand out as a driving force of the 2020s when we look back from 2030 is guesswork. It may well be something else that is barely on the radar yet. Nobody should go all-in on any of them. Still, all look like worthwhile areas for investors to spend some research time.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
-
How to pay in a chequeReceiving or writing a cheque has become much less common in recent years as instant bank transfers have grown in popularity. Amid widespread bank branch closures, we explain what to do if you get a cheque, and how you can pay one into your bank account.
-
Crypto assets of seven million UK investors at risk – how to keep yours safeCryptocurrency wallet rules make it hard to track down assets after someone has died, even if they leave a will saying who they would like to inherit them
-
8 of the best properties for sale with kitchen gardensThe best properties for sale with kitchen gardens – from a 17th-century timber-framed hall house in Norfolk, to an Arts & Crafts house in West Sussex designed by Charles Voysey with a garden by Gertrude Jekyll
-
Why investors can no longer trust traditional statistical indicatorsOpinion The statistical indicators and data investors have relied on for decades are no longer fit for purpose. It's time to move on, says Helen Thomas
-
Investors rediscover the virtue of value investing over growthGrowth investing, betting on rapidly expanding companies, has proved successful since 2008. But now the other main investment style seems to be coming back into fashion.
-
8 of the best properties for sale with shooting estatesThe best properties for sale with shooting estates – from an estate in a designated Dark Sky area in Ayrshire, Scotland, to a hunting estate in Tuscany with a wild boar, mouflon, deer and hare shoot
-
What we can learn from Britain’s "Dashing Dozen" stocksStocks that consistently outperform the market are clearly doing something right. What can we learn from the UK's top performers and which ones are still buys?
-
The most likely outcome of the AI boom is a big fallOpinion Like the dotcom boom of the late 1990s, AI is not paying off – despite huge investments being made in the hope of creating AI-based wealth
-
The rise of Robin Zeng: China’s billionaire battery kingRobin Zeng, a pioneer in EV batteries, is vying with Li Ka-shing for the title of Hong Kong’s richest person. He is typical of a new kind of tycoon in China
-
Europe’s forgotten equities offer value, growth and strong cash flowsOpinion Jonathon Regis, co-portfolio manager, Developed Markets UCITS Strategy, Lansdowne Partners, highlights forgotten equities he'd put his money in
