December 26, 2014

What will be the next big thing in 2015?

As we wrap up another year, investors are already looking ahead to 2015 to see what’s next. We are riding quite a wave of expectation into 2015, with a rising GDP, solid retail into the holiday season, continuing low interest rates, and an oil price collapse that has put unexpected money into everyone’s pockets. Things are looking up in the U.S. – way up – and changes are happening exponentially on all fronts. How will robotics and 3-D printing shift the global landscape? What will peer-to-peer businesses like Uber and Air BnB do for our economic environment? The trends are coming fast as freight trains, so let’s take a look at some of what 2015 may hold in store for investors.

As always, trendy does not necessarily equal smart, and we offer these predictions not as investment recommendations, but as an interesting peek into cultural changes that may affect the investment environment for everyone.

  1. Micro-everything

Last year, we discussed the movement toward decentralization as evidenced by crowdsourcing and social media. This year, the trend of individual empowerment takes off, with micro-lending, micro-borrowing, and micro-investing making it possible. The grand successes of Kickstarter have made everyone a potential entrepreneur, especially when small-scale is the new black, and people are getting in on it from every angle. Also, peer-to-peer businesses, propped up by new technology applications, are popping up everywhere, challenging the status quo way of doing things. For example, Uber and Lyft are all but replacing taxis in some cities. We predict a continuing rush of start-up micro-companies and peer-to-peer technologies in 2015.

2. Interest rate-based behavior

The Fed has indicated that they will nudge interest rates back up, albeit very gingerly so as not to undermine growth. However, the change will likely result in some volatility in both bond and stock markets as the prospect of rising interest rates makes investors nervous. Be on the lookout for ups and downs as the Fed looks to push interest rates higher. Despite this nervousness, the on-the-ground reality of low interest rates results in an environment of easy money for borrowers that encourages risk taking. We expect that in 2015, there will be a large contingent of investors who will be looking for higher-stakes investments in 2015, ready to take on more risk.

3. Can you do it yourself?

With technology that can accomplish just about anything (or so we think), the do-it-yourself trend is moving into new territory. Investors are latching onto indexing as a seemingly easy way to direct their own investments, launching a growing trend toward passive management. But we think that expertise may come back into fashion quickly, as do-it-yourselfers realize the value of the thoughtful selection and allocation of active managers.

4. Reinventing money

The essence of money shifted when the U.S. left the gold standard in 1971 and the dollar became a fiat currency, requiring a different way of thinking about what money is and what it represents. Now it’s shifting again, as we move to almost exclusively digital accounting. Apple’s new ApplePay feature is another nail in the coffin for the old kind of dollars and cents. Money is becoming less tangible and more transactional. People are starting to see dollars not as a fixed instrument of trade, but as a fluctuating instrument of variable value. There may be some movement away from so-called “safe” investments like money markets as investors become more aware that preserving dollars does not necessarily translate into preserving value.

5. Looking for value overseas

The U.S. has seen steady improvement since the financial crisis, with an accompanying long upward trend in the stock market. Beginning in 2015, investors may begin seeking out new growth areas. One likely place to look is overseas, where the ravages of the crisis are just starting to fall away. Europe has struggled since the crisis, but a late recovery may be on its way. Additionally, the strengthening U.S. dollar will make it possible for U.S. investors to get more for their money by investing internationally. On the home front, U.S. companies could be acquiring more foreign assets with their stronger U.S. dollars as well.