The energy transition and geopolitical tensions are among the new megatrends. picture alliance / Zoonar | Kyrylo Shevtsov
In its semi-annual report, asset manager Blackrock identified five “megatrends” that investors should pay attention to.
These include artificial intelligence (AI), the energy transition, an aging population, a transformed banking sector and geopolitical tensions.
When it comes to AI, the company sees data-intensive companies as underappreciated winners.
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Blackrock, the world‘s largest wealth manager, sees five megatrends that have the potential to define or destroy future portfolios.
In its semi-annual report, the company explains that investors should pay attention to technology, geopolitics, population growth and the financial sector.
1. Artificial Intelligence
Like the rest of Wall Street, Blackrock has artificial intelligence at the top of its agenda.
In raising the outlook for the sector, the company cited strong enthusiasm for the burgeoning technology. The company now rates the artificial intelligence space as “overweight” for its potential to increase productivity, profit margins and cost savings.
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While the company is optimistic that AI will drive up valuations of makers of microchips — the hardware that makes AI work — Blackrock believes that companies that have data are used to train AI , are underestimated winners.
“Companies that have large data sets of their own are able to use large amounts of data more quickly and easily to develop innovative models,” the report states. Gold mine that some companies may be sitting on, analyzing and developing.”
2. The low-carbon transition
In terms of new innovations, investors should also prepare for the transition to low-carbon economies, Blackrock said. With the expectation that the transition in developed countries will be faster, the transformation of energy systems should give investors the opportunity to stay ahead of the curve.
As an example, the company cited the rise in electric vehicle prices, which have benefited from an emphasis on low-carbon solutions. However, timing these big changes requires investors to make assumptions about future politics, technology and consumer preferences.
3. Geopolitical fragmentation
The management firm has bleak prospects for the future of the international order, and investors should brace themselves for further world fragmentation. Economic efficiency will no longer determine geopolitical relations as national security and resilience take precedence.
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As tensions between the US and China fuel protectionist measures, Blackrock expects investments in infrastructure and robotics to increase. At the same time, the possibility of future confrontations between other emerging powers could mean growth in defence, aerospace and cybersecurity sectors.
4. An aging population
The aging of the world‘s population is another troubling megatrend. As the future workforce shrinks in a number of markets, this has implications for productivity, growth and government spending.
Blackrock sees this as a boost to inflation as the retired population will maintain spending levels despite lower productivity.
5. A transformed banking sector
The company’s report also predicts a permanent transformation of the financial sector, highlighting that the changes brought on by the banking turmoil earlier this year could be accelerating.
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For example, investors can expect further consolidation of smaller institutions as credit tightens. This will help strengthen the role of non-bank lenders and private markets within the sector.
Overall, Blackrock remains underweight US equities as it anticipates some form of macro damage. However, short-dated government bonds are highlighted as high interest rates continue to support higher yields.
Disclaimer: Stocks and other investments are always associated with risk. A total loss of the invested capital cannot be ruled out either. The published articles, data and forecasts are not an invitation to buy or sell securities or rights. They also do not replace professional advice.
Read the original article in English here.