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Economic trends | Investment news

Tipping the Apple Cart: Investment trends to watch for in 2016

12/11/2015

Over recent years, we’ve watched imbalances build in numerous areas: wealth inequality, low interest rates, concentration of corporate wealth, growth over value, and U.S. market and dollar outperformance. Will 2016 be the year the balance tips the other way?

Here we explore a few trends to watch for in 2016. As always, a trend does not equate with a smart investment, 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. Welcome to the global village

In 2016 and beyond, we see investors becoming increasingly aware of the interconnected nature of economies, politics, and markets. Watching world events more closely, investors will take an increasingly global perspective. While this opens up global opportunities for investment and diversification, it may also introduce new layers of volatility as investors become reactive to news stories, whether here or in far-off countries.

2. Democratizing everything

With the great expansion of social media, anyone can be an activist/journalist/business owner/star/fill in the blank here. A tool of individual empowerment, social media has opened the door for anyone to go viral. Whereas investors used to look for the next big thing, now they can try to create the next big thing. New technologies that enable peer-to-peer lending, micro-lending, and micro-businesses are unleashing a wave of entrepreneurs that will provide new opportunities for investors.

3. Searching for yield

With global treasury bonds now yielding an average of only 1.2% (BC Global Aggregate Global Treasuries yield as of Dec. 7, 2015), many investors are aggressively seeking other, higher-yielding alternatives, such as real estate debt financing, corporate direct lending, and consumer lending. We expect that many investors will decide that the yield potential of these opportunities outweighs any necessary liquidity or other sacrifices.

4. Investing for Impact

Some investors aren’t just seeking yield; they are looking for ways to put their money to good use while earning a return. Impact investing covers a broad spectrum. For some, it simply means eliminating investments in industries like tobacco and weaponry. For others, it is searching for ways to do good while doing well. And for some, it’s really more about philanthropy than investing. Investors are hungry for opportunities across the impact spectrum, and we predict that the investment industry will carve out different ways to help investors find opportunities where their money can make a difference.

5. The Coming of Robin Hood

There has been a slow but steady consolidation of wealth, in both the corporate and consumer worlds. The largest corporations dominate the stock market, with the top ten holdings of the S&P 500 making up nearly 18% of the Index, eclipsing the smaller players. But many of those corporations and people aren’t spending their wealth, a trend that won’t boost the economy. We suspect that a wealth rebalancing is on its way, particularly with the democratization of business. We see a potential reversal in the decades-long flow of money toward ever-growing giant corporations as technology makes it possible for smaller, more nimble businesses to provide equivalent or better services. The apple cart of giant industry may be tipped by the little guy – think Uber and Air BnB.

Will we see things balance out in 2016? We wouldn’t be surprised to see a return of value stocks, a normalization of interest rates, a rebalancing of global equity markets, and a reduction in the rich-poor wealth gap. While we don’t know when these things will happen, we think it’s quite likely that they will happen eventually. The question is: will 2016 be the year the apple cart tips?