The Evelyn Partners Megatrends Podcast

The demographic dividend

Demographics have an important impact on economic growth. A higher working age population can lead to faster economic growth, while an ageing population can be a drag on productivity, While Western economies enjoyed a demographic dividend in the post-war period, those ‘babyboomers’ are now retiring, creating a headwind for growth.  

In contrast, the UN expects countries such as Nigeria, Pakistan, Egypt, Philippines and India to have some of the strongest population growth rates over the next 15 years or so. Of the seven continents, Africa is expected to have the highest population growth rate at 2.2% per year until 2040. This is an important advantage.

However, demographics aren’t destiny. There will be other factors at work in whether a country grows quickly and innovates – its infrastructure, for example, or the strength of its rule of law, but it can be an important guide to opportunities and growth.

Taiwan

Domestic identity in a geopolitically-contested territory can trigger blow-ups between superpowers. This has been seen in Ukraine, where a growing sovereign identity may have provoked Putin to attack. The upcoming Taiwanese elections may prove a flashpoint in the country’s fragile relationship with China, previously held together by the disputed ‘1992 Consensus’,

The Democratic Progressive Party (DPP) – which disputes the 1992 consensus – has been in power since 2016 and is the frontrunner in the upcoming election, while the more pro-China KMT has weakened. If the DPP were to secure another victory, it may catapult China into stronger action to protect its interests in Taiwan.

The response of the US remains a key unknown with mixed messages coming from the country’s administration. If the US were to launch sanctions, or a military invasion, it would prove profoundly destabilising for the global economy and financial markets. The election will be watched closely.

Artificial intelligence

The rapid adoption of ChatGPT has created real excitement about the potential for generative artificial intelligence. Could it improve productivity? Galvanise economic growth? Create new and interesting jobs? Others predict a darker outcome, where AI replaces white collar jobs, leaving some sectors obsolete.

In this podcast, we explore the risks and opportunities in AI. Goldman Sachs has estimated that AI adoption could drive a 7% increase in annual economic output, and deliver solutions to some of the world’s largest problems, from climate change to worsening demographics. However, there are risks to white collar professions from generative AI, particularly the finance sector.

The total AI market could be world $900bn by 2030. There will investment opportunities for those companies that benefit from efficiency cases, but also those providing AI tools, plus ‘picks and shovels’ providers such as semiconductors. There will also be those on the wrong side of the change, who will find their businesses disrupted.

The themes shaping the global economy

The past four decades have been labelled ‘great moderation’ – a benign period characterised by low inflation, strong growth and falling interest rates. This has been driven by improving demographics, the end of the cold war, rising globalisation and the opening of China. In the past few years, this stable period has come to an end.

Over the next decade, a series of new forces will guide investment markets. These ‘megatrends’ are an important part of our decision making at Evelyn Partners, guiding us to areas of structural growth and away from significant risks. Our research has identified four structural themes driving markets today: shifting demographics, the changing world order, a bumpy energy transition and the technological revolution.  

These themes inform individual stock selection, steering us towards those companies likely to see tailwinds over the next decade, while avoiding those facing significant disruption. They also help shape strategic asset allocation. In this episode, we explore these megatrends in greater depth.