December 17, 2013

Five Investment Trends Coming in 2014

With economic data looking up in the U.S. and to some extent around the world, what comes next? Of course, no one knows the future, but we can make some guesses about what some of the trends will be in 2014. While it’s fun to speculate about investment trends, we would remind investors that a trend is not necessarily a good investment; just because it’s trendy does not make it sound. We offer these investment trends as a fun look into the future, not as suggestions for how best to preserve and grow wealth.

  • Small is beautiful. What do Kickstarter, crowdsourcing, and digital currency have in common? They all put power in the hands of individuals rather than large organizations. The appeal of decentralization is growing as web platforms and online applications open the door to instantaneous, global communication for everyone. Social media makes it possible for anyone to grow a network capable of allowing them to fund a project, start a business, or trade a currency. We expect this trend of democratization to continue growing in 2014, affecting everything from how we trade goods and services to how we relate to government.
  • Sustainability becomes the norm. A few years ago, sustainable investing was on the cutting edge of the investment industry. Now, it’s just par for the course. Investment firms are recognizing that businesses that don’t use sustainable practices are increasing their risks on a number of different fronts, from energy costs to reputation. Including an evaluation of sustainability as a normal part of the risk analysis of a company is becoming standard operating procedure. We suspect that those firms that don’t hop on the sustainability train may be left behind.
  • Globalization is the new black. In the early 2000s, international and global investing became commonplace for many U.S. investors. The leading edge of global investing had reached to frontier markets when 2008 hit and was then followed by several years of retraction. But now, as the dust settles, globalization may be making a comeback in 2014, with an emphasis on emerging and frontier markets. Why? The demographics in emerging and frontier markets are younger, with a greater proportion of working-age people. This, according to some experts, should translate into faster GDP growth in those countries.
  • Microfinance makes an impact. Decentralization and democratization via the Internet has made it possible for a U.S. worker to support an African start-up with the push of a button. The opportunities for microlending, both inside and outside of the U.S., are multiplying quickly. Small amounts of money can make big impacts, especially when combined in crowdfunding, and investors can feel connected to the ventures they are supporting. It’s a new kind of impact investing, where you can choose the individual or company you want to finance, and where your dollars count in a different way than with institutional investing.
  • New energy technologies are hitting the market. Energy is becoming cheaper and easier to access as new technologies for harvesting, storing, and distributing energy become available. We are likely to see shifts in the energy market, with possible booms in areas like solar energy and natural gas. It’s difficult to predict exactly where the trends will be, other than the near-certainty that energy will be in the headlines in 2014.