5 Investing Trends Over The Next Decade Not To Be Missed!
The last decade has been a rewarding time for savvy investors in the stock market. Looking ahead, these are the top 5 investing trends over the next decade that you don’t want to miss!
Before investing blindly into an S&P 500 Index fund you may want to look closer at some hotly tipped investing trends for the next decade. You may have noticed that several of these trends have already made huge gains off the back of 2020.
Can these winning trends continue to deliver over the next decade? Here are the growth sectors and investing opportunities to consider for the decade ahead.
E-commerce
The global pandemic brought e-commerce to the fore making it one of the great solutions to the Covid stricken world. Lockdowns have forced new customers onto E-commerce platforms such as Amazon and Etsy. Yet even as lockdowns ease it’s likely that many new customers will continue to enjoy the convenience of online shopping. E-commerce has been a great beneficiary of the pandemic, but it certainly doesn’t end there. Globally buying habits have been shifting online for some time with 2020 likely to have only further accelerated this trend.
E-commerce businesses such as Amazon and Alibaba are hugely profitable behemoths. Year over year sales are growing as they continue to grab market share from brick and mortar retail. Add to this other fast-growing E-commerce businesses both in the US, South America and China. Shopify, Etsy, Mercado Libre and Pinduoduo are some of most well known E-commerce platforms from each of these regions. China looks set to become the first country to surpass the 50% mark of total retail sales coming from E-commerce companies in 2021. Furthermore just 4 Chinese companies account for 44% of global E-commerce. With E-commerce making up a much smaller percentages of retail sales in the US, S. America and Europe, there is still plenty of room for growth in these countries. E-commerce is continuing it’s rapid growth trajectory and is likely to be one of the big winners of the future
Fintech
Many people still aren’t exactly sure what fintech is and if you’re in that category don’t worry. Fintech merely describes companies that use technology to make financial services more accessible and efficient. Fintech companies often use technologies such as artificial intelligence, software and data analytics to create new financial tools or improve old tools. Examples of some services include payment processing, online banking, and P2P lending to name a few.
Fintech Adoption
You may not know it, but you have likely already made use of several fintech companies. Due to the global pandemic many consumers have turned to online and digital forms of payment. This includes using PayPal for online purchases and tapping your Visa or Mastercard at the grocery store. As with E-commerce the events of 2020 have helped speed up the adoption of cashless payments.
There are several catalysts for growth beyond 2021 that make Fintech one of the investing trends of the next decade. For one, there is a growing shift towards making payments using card or mobile payment apps such as Apple Pay. Whether we like or not, we are swiftly moving towards a cashless society.
In China the Fintech revolution is already well advanced and should serve as a glimpse into the future for those of us in the US, Europe and beyond. Mobile payment adoption in China has skyrocketed. In 2015 35% of China’s smartphone users made mobile payments compared to 79% in 2020.
Payment Apps
Paypal with their Venmo app and Square’s Cash App are vying for a slice of mobile payment transaction market. Both these American companies have are seeing huge uptake in their App offerings. The Mercado Pago payments platform, part of MercadoLibre E-commerce business, is also hoping to take advantage of the shift to digital payments.
The number of companies in this Fintech space appears to be growing as fast as the industry itself. There certainly is no shortage of investing options for would be investors to research and possibly take advantage of. The hotly anticipated Ant Financal and Stripe IPOs are just two companies investors are still waiting on in 2021. With all that said, Fintech is likely to be one investing trends over the next decade not to be missed!
Electric Vehicles
EV’s are already a trend in the making with electric vehicles now firmly moving towards mainstream adoption by 2030. Anyone interested in cars or the stock market would not have failed to witness the epic rise of electric car maker Tesla in 2020. Chinese EV company NIO has been making similar waves in the stock market during 2020, pushing EV’s as an investment into the consciousness of many investors. So, the question is why has this happened and what is the outlook for EV’s going forward? When it comes to individual stocks there are many reasons why the share price might explode. Looking at the industry it belongs to can give us a clearer understanding of the broader market outlook.
Consumer Demand
There are several major catalysts for electric vehicles as a growth sector over the next decade that you don’t want to miss. Consumer demand for one, is a massive plus for electric vehicles. Consumers are becoming more and more concerned about their carbon and environmental footprint. EV’s give consumers the choice of purchasing a much more environmentally friendly and cleaner form of transport. Add to this the cost of EV’s are falling, making them more and more competitively priced with their internal combustion engine equivalents.
Government Backing
A second major catalyst for electric vehicle growth is government policy and emission targets. The UK government has taken a huge step towards decarbonisation and in a particular boost to EV adoption through the banning of new petrol and diesel vehicle sales by 2030. With many countries having similar zero carbon emission targets for 2050, it’s likely more will follow in the UK’s footsteps creating a huge new EV market.
The China Effect
The third and perhaps biggest tailwind for EV’s is the growth of the EV sector in Asia. China is currently dominating the electric vehicle market, with half of all vehicles being sold in China. This is important not only because of the size of population in China, but also because the government policy is to push for greater EV adoption.
China has continued it’s policy of incentivising EV purchases by extending purchase subsidies through to 2022. This will likely have a significant positive impact on EV sales in what is already its biggest market. Deloitte has forecast a global compound annual growth rate of 29 per cent from 2020 to 2030. The global shift to electrification of the car industry is firmly under way. At such an early stage there is likely to be plenty of time for investors to benefit from this investing trend over the next decade and beyond.
Green Energy
Global energy consumption is projected to rise by almost 50% between 2018 and 2050, according to Bloomberg’s NEO report. This considerable rate of growth is predicted to be led by emerging economies in Asia.
The combination of this growth and the shift to renewables in established economies in North America, Europe and China is a trend likely to continue well into the next decade. Renewables are on course to replace coal as the largest source of electricity generation globally by 2025. IEA Renewables 2020 also states that hydropower, solar and wind will make up the majority of this renewable source.
Public and Private Investment
Government policy and private sector investments in clean technology all point to green energy as a trend worthy of investment you don’t want to miss. So, let’s take a look at some of the areas that could provide opportunities for investors. As you’ve probably already guessed Wind and Solar are particularly popular areas for investment. Less obvious investment opportunities include commodities such as cobalt, silver and copper. (You can check out my article on copper for a deeper analysis of one such commodity)
Each of these areas can be broken down even further. Investment oppportunities exist in companies that both manufacture and install solar panels and wind turbines. Examples include First Solar, Sunrun and Vestas Wind Systems to name a few.
Energy Producers
Utilities companies also provide investment opportunities in the green energy sector, as they shift away from fossil fuels to renewables. NextEra Energy is an example of one such company that is continually moving towards greater utilisation of clean energy sources. Brookfield Renewable Partners is one example of an energy company that actually sells the electricity they produce to utilities companies. This variety of business model leaves investor with a variety of options to research and consider.
Green ETFs
Green Energy is certainly an area that demands investor attention, offering investing opportunities in the coming decade and beyond. Indeed, investors have already taken note as evidenced by the significant inflows into clean energy related ETFs. In the last year alone the popular iShares Global Clean Energy ETF has soared by an incredible 140%.
Healthcare
Unlike the previous 4 sectors covered in this article, healthcare may not be an obvious choice for a growth trend. However, I will hopefully outline why I believe it is one of the best investing trends over the next decade. The recent global pandemic has thrust healthcare to the centre stage, reigniting interest that had dwindled in the previous decade. According to the OECD ‘Health at a Glance’ report healthcare spending will outpace economic growth. At this rate healthcare spending is expected to reach 10.2% of GDP by 2030.
There are number of reasons to expect continued growth in this sector. Innovation such as advances in gene editing and aging populations are significant tail winds. So too is the number of emerging economies requiring better healthcare as millions are lifted out of poverty.
Over the long-term the healthcare sector has outperformed the general stock market. This has not been the case in recent years due to potential regulatory changes in the US that frightened investors. These fears have been largely over emphasised. Meaning US healthcare stock valuations may now actually reflect a headwind which is yet to materialise. This potentially gives investors the opportunity to invest at lower valuations than otherwise would be the case.
Drug firms
The most obvious area for investment is major pharmaceutical companies commonly referred to as ‘big pharma’. These companies are key players in drug research and production, providing the specialist and generic drugs for hospitals and pharmacies. Due to their size and continued drug research these types of companies offer both potential growth and stability.
Medical Equipment
Medical equipment companies provide everything from basic gear such as facemasks to high-tech devices such as dialysis machines. There is almost constant innovation in this field as medical devices play an ever more important part of healthcare provision. Surgical robotics is an example of a field that has considerable growth and application potential.
Insurance
This area may not be particularly well known to investors outside of the US. However, in the US and countries without a national health service, health insurance is a necessity. Companies that provide healthcare insurance hope to grow revenue as populations age and policies are held for longer.
Healthcare REITs
Health REITs invest in properties such as hospitals, nursing homes and private surgeries. They make their money in much the same way as any REIT. However, they are often deemed as both a safe and growing sector due to the healthcare tailwinds previously discussed. Also, these types of facilities are both essential and likely to remain in demand no matter the economic situation.
Summary
Every decade provides new challenges for the investor, however there are also plenty of opportunities as outlined above. It is my belief that with adequate research and a dose of good fortune these 5 sectors will continue to provide investors with some big opportunities. Growth in the decade ahead is certainly not limited to these 5 areas alone. However, I believe they represent 5 of the best investing trends over the next decade that you don’t want to miss!
