The future is loading! An inquisitive aspect of capital market research is discerning between cyclical and secular trends. Different investment strategies may focus on one more than the other, but investment managers need to recognize the potential gains and risks of each.
Many past periods are often labeled based on a quintessential aspect of that period. For example, the Iron Age was when humans harnessed the strength of metals. The Industrial Age is when humans embraced mechanization. More recently, the Information Age is when humans employed semiconductors and computers. The 2010s were termed ‘The New Normal’ for its low interest rates, very low inflation, and moderate economic growth. Absent COVID, ‘The New Normal’ might have continued.
So, what’s in store for the post-COVID period? Let’s term the next evolutionary stage as ‘The Transformation Age.’ Clearly, ‘business as usual’ will not return. Interest rates seem poised for a long-term rise in rates (almost the opposite of the last 40 years). Inflation is not likely to replicate the sub-2% of the 2010s. The reliance on technology, robotics/AI, kiosks, phone apps, driverless vehicles, development of the metaverse and much more will increasingly make the 2010s look like caveman days. We have yet to reach the Jetsons Age, but we are clearly on the way. Hence, the next decade or two may be considered the Transition Age.
In 1965, Gordon Moore developed Moore’s Law. Moore observed computing power doubles every two years. This has a compound effect. Doubling numbers starting with 1, the sequence would be 1, 2, 4, 8, 16, 32, 64, etc. It’s not too hard to conceive a time when computers, robotics and machines over-run their human parents. (Sci-fi fans can appreciate movies of such a dystopian future.)
56 years after Moore’s Law was devised, technology implementation convergence has begun. Oddly, a primitive biological invader forced incredible technological change. COVID forced the development and utilization of uncountable virtual processes and made us realize augmented reality or the virtual world is not just a Sci-fi flick, but here as the next evolutionary step.
The Transformation Age will include enhanced eCommerce and communications, new and changing careers, digitization/robotics/AI, labor/worker conditions changes, production re-globalization and going green. Many of these taken together are foundational to the eventual Jetsons age. Transformation will not come without its challenges and opportunities.
Opportunities will come by way of new innovations, new industries, and new companies. Challenges come by way of intermediate-term disruptions such as identifying raw material supply sources, displaced/re-training workers, current product obsolescence and industry cessations.
Our capital market research (the foundation for our portfolio models for 2022) is set to be released in the coming weeks. We hope you take a few minutes to review the trends we’ve identified and how they influence your portfolio, and our vision for the rebalancing we will be making for the year to come.
The opinions expressed are those of Heritage Financial and not necessarily those of Lincoln Financial Advisors Corp. Forward looking statements may be subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. CRN-3915920-111521
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