The Covid-19 crisis has made our task, which was never straightforward in the first place, far more complicated. Whatever their vantage point, investors will find there is no escaping the pandemic’s effects. For the most part, the health crisis will reinforce or accelerate trends that were already unfolding in both financial markets and the economy. Even so, it will still change the way countries are governed, businesses are run and people live their lives.
The Secular Outlook is divided into two main sections:
- Secular trends
- Our return projections for the next five years
In section 1 "Secular trends" of the Secular Outlook, we focus on the long-term effects of the pandemic in Chapters 1 "Legacies of Covid-19" and 2 "Central bankers' brave new world".
In Chapter 1 "Legacies of Covid-19", we reflect on how the coronavirus will influence government finances, consumer and corporate behaviour, and economic growth. We also explain why we believe Covid-19 will accelerate the transition to a more inclusive and sustainable form of capitalism. In Chapter 2 "Central bankers' brave new world", we turn our attention to monetary policy and how it might evolve in a post-pandemic world. Central banks, we argue, will inevitably venture further into unfamiliar territory in their attempts to engineer a sustainable recovery.
We move beyond Covid-19 in Chapters 3 "The battle for tech supremacy" and 4 "Passive and private: where next?".
The possibility of a global technological Cold War is the subject we explore in Chapter 3 "The battle for tech supremacy". As China redoubles its efforts to loosen the US’s grip on the tech industry, the fear among many investors is that an intensification of Sino-US rivalry will lead to geopolitical instability. But that is not the only possible scenario. Our view is that growing competition may give rise to an acceleration of technological development and diffusion, providing a much-needed boost to global productivity. Asia is likely to be the winner in the tech race, in the long term.
Chief Strategist
Chapter 4 "Passive and private: where next?" analyses the prospects for passive investment and private equity. We believe that after experiencing stellar growth in recent years, the “two Ps” will enter a more mature and challenging phase of their development.
In section 2 "Asset class return projections" of the Secular Outlook, we detail our return projections for the next five years; these encompass equities, bonds, currencies and a range of alternative assets. We expect returns for investors to be well below average over the next five years – but believe there remain some particularly attractive investment opportunities, especially in emerging markets and some alternative asset classes.
We very much hope that, on reading this year’s edition, you find yourself better equipped to deal with the uncertainties that lie ahead.