RBC Wealth Management, part of Royal Bank of Canada (RBC), has highlighted nine "megatrends" which the bank believes will define investment philosophy in the future.
The first area is technology. By 2020, it is estimated that 50 billion devices will be connecting, sending and receiving data all round the world. Additionally, in 2018, global spending on digital transformation technologies is expected to reach $1.3 trillion, an increase of 16.8 percent from 2017.
David Storm, head of multi asset portfolio strategy at RBC Wealth Management, commented: “With the rise of a connected world already impacting organisations and industries, our view is that technology will provide a whole new set of investment opportunities.”
The second area is millennial influence. Millennials are set to inherit an estimated $4 trillion by 2020, and are driving growth in the sharing industry. Many appear to look for firms that align their business objectives with a clear set of values, which is likely to lead to the growth of environmental, social and governance (ESG) policies strategies across industries.
The third factor highlighted is increased longevity, which will boost the healthcare sector and those that cater to the elderly. While the elderly can be a financial drain on family, business and government, they also represent an investment opportunity. The over-80 age group is expected to triple in the next 35 years, meaning that healthcare and pharmaceuticals are likely to account for a greater share of investment portfolios.
Mr Storm explained: “We expect investors to concentrate more on companies that provide goods and services that the ‘Silver Society’ demands, and which are likely to deliver positive returns over a medium to long-term horizon.”
Emerging technology in food production and distribution was also highlighted by RBC. Agribusiness sectors are facing unprecedented demand to deliver an increasing volume and variety of products. This means that the production of cereals, meat and other foods will have to increase by around 70 percent to cope.
Additionally, demand for water is expected to grow by 55 percent by 2050 opening a new market for investors. Water, currently a $600 billion market, is poised to grow to US$1 trillion within the next two years.
The sixth trend highlighted is the expansion of the waste management industry as businesses and governments will have to increase waste management and recycling solutions to cope with growing demand, creating plenty of investment opportunities.
RBC also suggested that, with the advancement of cell phone technology and the potential of 5G networks, mobile gaming could account for over half of the total games market, and the emergence of virtual and augmented reality is likely to grow the market even further.
Mr Storm, commented. “We are likely to see current gaming platforms grow and new platforms emerge, creating the perfect environment for incoming investors.”
Another factor that was highlighted is the rising middle class population, meaning an estimated $5 trillion in infrastructure investment will be required globally before 2030. Additionally, a growing middle class demands convenience, better housing, commercial space and mass transit systems, thus creating an opportunity for investors that could give positive, long-term results.
Finally, RBC highlighted renewable power technologies. Globally, governments are aiming to increase green technology and investment in efficient energy increased to $231 billion in 2016. Investors have the opportunity to benefit from advancing technologies and evolving markets which focus on green energy.
Mr Storm concluded: “Each of these industries is small compared to the incumbent traditional industry they are beginning to replace, but their growth rates are much higher. All of these areas represent meaningful ways to invest in the future economy.”
RBC Wealth Management has C$938 billion of assets under administration, C$651 billion of assets under management and more than 4,800 financial consultants, advisers, private bankers, and trust officers around the world.
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