Eyes on the prize.

Let’s just start off by saying that it’s incredibly difficult to predict exactly what the future has in store for us, and media thrives on this by publishing just about anything to get their “news” out there. That can really cause our heads to spin in the short-term, and believe it or not can have a huge impact on share price valuations.

With that being said, where should investors place their focus when nearly every new venture is made out to be the next big thing?

Where to start?

The world is always faced with investing opportunities, but most people just aren’t in tune with whats going on to really call out a great investing opportunity.

As previously mentioned media really thrive off volatility in the market, thus leading to huge speculative choices taken on by the retail investor.

So , where can the average investor start looking when trying to identify a solid long-term investment, before it becomes blatantly obvious to the rest of the market?

1. Understand the Concept of Top-down investing and bottom down investing.

2. Undrestanding Macro-Trends

A macro trend is a long-term directional shift that affects a large population, often on a global scale. For example, climate change is affecting industries in both positive and negative ways :

3. Demographics

Younger generations are more likely to drive change, rather than older generations entering the end stages of their career or earlier retirement.

Lets take social media as an example, primarily Facebook. When Facebook was invented, the early adopters were mainly within the age groups of 18–25 at the time (millennials). Once the product caught on, it trickled down into other generational groups through recommendation. Today Fb has a total of 2.8 billion active users.

Another more relatable example of this would be Revolut and other fin-tech companies. Lets look back to 2017/18 when Revolut really started gaining traction locally here in Malta. The early adopters of such technology were definitely individuals within the age groups of 18–25. Once it was clear that Revolut served a purpose to us and made our lives more convenient, the product was referred to our parents and subsequently our grandparents. Today significantly more individuals use some sort of fin-tech product that makes sending and receiving money more convenient.

From the above diagram we can see that the global population is younger rather than older. What may this imply for future market trends?

1. Younger generations are more driven by technology than older generations, so we can expect to see earlier adoption rates of tech based products and services. Technology advancements will increase the likelihood of access to the internet in even the most rural areas on the planet, implying long-term trends, adoption rates and advancements.
2. Younger generations face a more socialist political view than previous generations. As younger generations rise to power we can only expect to see more socialist policies being implemented by the governments. Government policies are a precursor to change, shaping macro trends and creating opportunities.
   This is currently being witnessed under the Joe Biden presidency whereby a significant amount of capital is being allocated to the renewable energies industry. If you’re interested to view our take on this, be sure to check out: Social Capitalism & the Millennial Mindset.

4. Economic cycles

The cyclical nature of the economy means that investors can also use history to identify macro trends. Consider fiscal and monetary policy, which is implemented in response to economic climate and data:

A prime example of this would be how the institutions reacted when the world was forced into lockdown due to the coronavirus, and subsequently how the institutions are currently reacting to the reopening of the economy.

Due to the occurrence of the virus, the worlds economies were forced into instant recession, with the money velocity circulating to slow down dramatically. Due to this, we witnessed governments and central banks reduce interest rates to an all time low and huge stimulus packages were provided to encourage consumers to spend during economic turmoil.

Now with the economy reopening we are seeing governments reduce the level of stimulus provided and a possibly experiencing future hikes in the interest rates to avoid inflation from occurring.

In fact, in Jerome Powell’s most recent speech, it was stated that although interest rates remain at an all time low, there would likely be a couple of spikes in rates occurring in 2023, although not alarming.

Should there be an increase in the interest rates set by the central banks, this may act to the benefit of loan providers who can earn more money on the loans given to borrowers.

5. Emerging Markets & Economic Progression

Emerging markets can leave a telling story when it comes to assessing long-term trends. Lets take e-commerce as an example here.

E-commerce is expected to continue to grow in the coming years, and that isn’t really a surprise. But lets look at a region where there is still a lot of room for development in terms of infrastructure that is needed for E-commerce to thrive — Lets look at Africa.

In order for Africa to remain relevant in todays society, the necessary advancements and investments need to be made to its infrastructure. This may pose as a potential opportunity for investors.

By no means are we telling you to specifically invest in Africa, but look out for developing nations that could imply long-term growth.

6. Stop Taking The Obvious For Granted

Sometimes we take even the most basic necessities for granted. Take the internet as an example.

The internet has been around for approximately 25 years, and has managed to make its way into our everyday lives. Because the internet has been around for so long, it would only be natural to assume that developed countries are well connected, but you may be mistaken.

Lets take southern Europe as an example:

Surprised ? We are too!

Everyone would normally assume Europe to be highly connected, as we are here in Malta, but you’d be mistaken.

At face value, Europe could be considered to have one of the most modern civilisations, but even with that external label, many areas within civilised Europe contain individuals that have never used a computer … Opportunity!

Just assume what the internet connectivity and computer usage would be in developing areas of the world — South America, India, South East Asia, China, The Middle East, Africa and the list goes on and on!

Many of the largest internet companies that we know and love today have yet to tap into these markets.

Stop taking what we would assume to be obvious for granted — Opportunity is everywhere, You just need to find it, and pay the right price for it.

Conclusion

Today we live in a time where a vast amount if information and data is made readably available to the average Joe, and believe it or not there are people out there working with financial journals to simplify the not so obvious to the pretty obvious. This allows people to have a clearer vision on:

• Their long-term outlook
• See what occurrences and polices may affect a large population
• The future

As we like to say, knowledge is power and the more knowledge you accumulate the more likely you are to catch the next big wave — cowabunga!