Global equity markets are facing a different set of conditions from those that supported strong returns over much of the past decade.
Demographic change, geopolitical tensions, environmental pressures and rapid technological development are all changing the outlook for economies and businesses. At the same time, high government debt and changing interest-rate conditions could make it harder for broad markets to repeat their historical performance.
This does not necessarily mean there will be fewer investment opportunities. Instead, it could make the differences between individual companies increasingly important.
A shrinking workforce is one of the major changes taking place across many economies. For decades, a growing workforce helped support economic expansion and kept pressure on labour costs relatively low. That trend is now reversing in many countries.
An ageing population also creates additional pressure on healthcare systems and government finances, while the transfer of wealth between generations could influence consumer spending, investment and asset ownership.
Geopolitical risks are also becoming more significant. Businesses are having to consider cyber security, supply-chain disruption and the possibility of higher government spending on defence and security. Companies with exposed or complicated supply chains may face greater risks, while businesses providing products and services linked to security and resilience could benefit from increased demand.
Environmental pressures are creating another challenge for economic growth. Greater regulation and pressure to use resources more efficiently could increase costs across parts of the economy. At the same time, businesses able to provide solutions to environmental and resource-related problems could see increased demand.
Technology provides an important source of potential growth. Artificial intelligence could significantly increase productivity and change how businesses operate, although the economic benefits are likely to develop alongside the other pressures affecting the global economy.
These changes could also alter the way investors approach financial markets.
Real Estate Credit Investments Limited (LON:RECI) is a closed-end investment company that specialises in European real estate credit markets. Their primary objective is to provide attractive and stable returns to their shareholders, mainly in the form of quarterly dividends, by exposing them to a diversified portfolio of real estate credit investments.
