Megatrends typically emerge when social, environmental and technological changes occur. We have identified and explored four megatrends that may be worth keeping in mind.
It is widely reported that Australia’s population is rapidly ageing but what exactly are the implications of an ageing population and can you potentially profit from this trend?
Australia’s population is ageing due to two primary factors. Firstly, Australian families are on average having fewer babies resulting in a decline in the fertility rate. According to the ABS, there is no indication that this trend will reverse any time soon with the fertility rate lingering near an all-time low. Secondly, Australians are living longer with life expectancy boosted by advances in modern medicine and technology.
As the baby boomer generation continues to age and accelerates its shift out of the workforce and into retirement the demand for health care, age-specific accommodation, financial products and other services may continue to rise. This may create opportunities for companies in these expanding markets.
Some investors have been particularly excited by the opportunities present in the health care sector. The ageing population is a material and accelerating demographic tailwind for the health care sector.
Society is increasingly becoming aware of the adverse impacts of climate change. There has been an accelerating international push to combat and limit the effects of climate change. This has had wide ranging ramifications across the global economy and has resulted in an increased focus on the development of renewable energies and technologies, for example electric vehicles and battery energy storage. These technologies are heavily reliant on critical mineral commodities including: cobalt and lithium.
Lithium and cobalt have had stellar runs in the past few years as miners have struggled to keep up with a looming supply shortage in the face of soaring demand. However, the global uptake and penetration of critical renewable technology and products including electric vehicles and battery energy storage has barely scratched the surface.
Industrial Revolution 4.0
According to many commentators we are seeing the emergence of Industrial Revolution 4.0. According to Forbes, this refers to the combined effects of big data, cloud computing, cyber physical systems, the Internet of Things (IoT), machine learning and automation.
We have all seen the scary headlines telling us that one in three Australian jobs are ripe for full or partial automation from technology by 2030. Companies are spending trillions of dollars annually on their cyber security capabilities. Tens of billions of connected devices are set to revolutionise supply chains and technology. Data may even become more valuable than oil in the future.
Asia’s Expanding Middle Class
According to McKinsey, the world’s middle class is expected to grow significantly and most of this jump will come from developing Asian countries. Typically, as consumers are elevated to middle class status their disposable incomes rise and they tend to increase their consumption of non-essential goods and services.
Australia may be well placed to benefit from Asia’s rising middle class as the country has a strong reputation for being a high quality provider of goods and services. Already, we have seen strong demand from Asia for a vast array of local products and services including: wine, dairy, infant baby formula, tourism, resources and energy products, health care and aged care.
As Asia’s middle class continues to grow there might opportunities for Australian exporters to benefit, particularly as international trade in the region is increasingly integrated and mobile.
Research pays off
Investors looking to get exposure to these megatrends may want to invest in sector specific ETFs or alternatively research specific shares to invest in. (Hint: Here’s a handy article to help you when assessing and picking stocks.)
Identifying and positioning yourself for megatrends can be an effective long-term wealth creation strategy. However, this is easier said than done. Investors should conduct detailed research and seek professional financial advice before making an investment decisions.