Five Predictions for Long-Term Investors
Editor’s note: This article first published in the Fall 2022 issue of Beyond the Meeting Room, ALHI’s printed magazine, a luxury lifestyle publication focused on sharing compelling, inspirational and educational stories from beyond the four walls of a meeting room.
Financial markets move at warp speed today. The market drop during the spring of 2020, when the COVID-19 pandemic began, was the fastest decline in U.S. history, and it was followed by the third-fastest recovery.
COVID-19 proved to be this generation’s “Pearl Harbor moment.” The pandemic caused extreme adversity that sparked innovation and behavioral changes, helping to address some of the world’s biggest problems, said Martin Romo, a veteran equity portfolio manager who is President of Capital Research Company and Manager of The Growth Fund of America and The Investment Company of America.
The new investment opportunities stemming from innovation and transformation that many industries are undergoing should have investors thinking long-term—no matter your investment style or goals.
Many investors have relied on personal financial plans that factor in the trends of the next year or two, according to Craig Johlfs, CFP, President of Johlfs Financial Group, based in Denver, and an independent financial adviser for LPL Financial.
In today’s volatile environment, however, it pays to look further ahead, beyond whatever the market is doing at the moment. “Bear markets last about 13 months from peak to trough on average since WWII,” Johlfs said. “The 2022 bear market began on Jan. 3, 2022, so we are hopefully entering the later innings this cycle.”
If you haven’t updated your financial plan and goals with your financial adviser in a while, make an appointment to do that, Johlfs recommended.
“Has your financial plan changed? Have your long-term goals changed? Has your risk tolerance changed? It’s a great time to revisit those questions,” Johlfs said.
Here are five trend predictions for long-term investors to discuss with your financial adviser.
1. Health care innovation will continue to accelerate
Breakthroughs in diagnostics and genetic testing may advance early detection and allow doctors to treat disease before it progresses. Some cancers may be cured by 2030 with cell therapy. One big one is liquid biopsies, where doctors can use a liquid blood sample to identify cancer when it first takes hold. In the meantime, the day is not too far off when many of us will have devices that will analyze our blood, monitor our cardiology and check our breathing when we sleep.
This has two implications for most investors. One is that they may be living longer and can invest more aggressively at the traditional retirement age, in their 60s. “You can still take some risk in your 60s,” Johlfs said. “You’ve got such a long path down the runway.” And there will be plenty of opportunities to invest in sectors such as remote patient monitoring, which is expected to become a $2.4 billion market by 2024, and pharma, which is in the midst of a renaissance of R&D to cure cancer.
2. Cash will be a distant memory
The piggybank could be just as much of a relic as the rotary phone and typewriter a decade from now, when digital payments will become the norm, and store clerks will look at you sideways if you try to pay them with a $20. This trend has gathered steam in emerging markets, where many consumers don’t have access to a bank but do have mobile phones and access to mobile apps. And in the U.S., consumers of all ages switched to digital payments during the pandemic. For investors, financial technology companies with a large global footprint and smaller companies outside of the U.S. that offer merchants mobile payment platforms could be very interesting investments.
3. Semiconductor chips will be everywhere
These tiny chips already penetrate every aspect of our daily lives, but they will become even more common and powerful. In some cases, this will be through the phones, tablets, vehicles, entertainment systems and appliances we already have, or through enhanced wearables that track our workouts, sleep and overall health in new ways. One area likely to see considerable innovation is in autos, which will need more advanced components to operate safely and efficiently. Big opportunities could be ahead for companies that come up with transformative ideas to change life, whether they operate in communications, consumer electronics, the automotive industry or somewhere else.
4. Wearables will be ubiquitous
As people become more comfortable with wearable devices, experiences like traveling and living with disabilities could be transformed. Within a decade, devices that make high-quality, real-time translation a reality could be at our fingertips. Wireless earbuds might translate voices, and smart glasses would help read foreign text. What if improvements in machine learning, smart wearable devices and augmented reality took them one step further, perhaps telling you someone’s name and where you previously met? Companies like Apple, maker of the Apple Watch, and Google, which owns Fitbit, are worth watching for new innovations.
5. Driving will be transformed
By 2030, it’s likely that autonomous vehicles will operate in cities around the world on a large scale in fleets. Although some people will still own their own cars, that may be more of a luxury than a necessity. The market leaders in this space are currently part of giant companies—like Alphabet’s Waymo, Amazon’s Zoox, and GM’s cruise division. As these fleets become more visible, markets may reevaluate these companies, and we could see some become freestanding. The companies with the best technological components, rather than the best traditional manufacturing, could become the winners.
Driving will also become greener, with global electric vehicles sales expected to rise 28% a year over the next decade. As battery costs go down and new developments make these cars cost-competitive, there could be much stronger growth than the market predicts. Now that GM has announced it will go all-electric by 2035, and Volvo has promised to produce only EVs by 2030, other automakers could follow suit. The evolution of software-defined electric vehicles—which receive over-the-air updates that improve safety and functionality and also provide entertainment—could also entice more consumers to buy them. These updates could reduce the depreciation we associate with older cars.
Overall, there’s a lot to be optimistic about if you’re an investor. Opportunity is everywhere, as long as you’re able to look beyond immediate volatility and embrace the future.