While equities, credit and interest rates race toward a recession, long-term investors have a compelling entry point into the businesses reshaping the global economy.
Three trends that will shape the future of investing
Growth will be harder to come by this quarter—and likely the next. But demand tied to major, long-term “megatrends”—multi-year economic trends that will fundamentally change the world—may rise because of the coronavirus pandemic.
The three most promising megatrends are:
1. Digital transformation
2. Healthcare innovation
3. Sustainability
Digital transformation is more important than ever
Technological advances have always created economic opportunities— that’s not stopping. The question is where the next innovations will cluster, and how to find opportunities within them.
The biggest trend in tech today—and likely for the next five years—is data growth. Roughly 80% of the current datasphere was created in the last six years, and it’s expected to quadruple over the next five.
This information will need to be analyzed, stored, and protected. As a result, there will be significant investment opportunities in cloud computing, 5G, AI, and cybersecurity.
The coronavirus pandemic proves how crucial AI can be to managing and containing an outbreak. In China, AI helped create early outbreak alerts and deliver groceries to the quarantined. Globally, we’ve seen AI’s capacity to aid disease detection, prevention, and treatment.
Experts expect that AI alone will add $15.7 trillion to the global economy by 2030. That’s greater than the size of China’s GDP today.
The healthcare industry responds to freshly exposed shortcomings
The COVID-19 pandemic spotlights existing strains on healthcare systems around the world but perhaps most acutely in the United States, where health systems are already stretched and costly.
Scientists and technologists are rapidly innovating to address these long-standing challenges. For example, Baidu Inc., a Chinese tech company, is making its proprietary AI algorithm—which can analyze part of a genome in the new coronavirus in just 27 seconds—available for free to healthcare and research centers around the world.
Elsewhere, institutions are searching for gene therapies to replace lifelong treatment plans with one-time treatments to address the root cause of disease, opening the door for scientific discoveries and investment opportunities.
Businesses are still seeking sustainability
The recent drop in oil prices exacerbated global market anxieties. Moving to more sustainable technology, like electric vehicles, will help ease concerns.
But even before this news, it’s been clear that sustainability would take center stage this decade, as governments and businesses move toward the United Nations’ 2030 Sustainable Development Goals.
Since January, companies like Microsoft, Delta, and BP have announced carbon neutral or negative targets. At the World Economic Forum in Davos, Switzerland, the environment dominated the top five risks facing the world for the first time since 2007.
But how do you invest in sustainability?
To make the most efficient and least damaging use of earth’s resources to satisfy the basic needs of the population, the answers become clear: food, water, and clean air.
Take food, for example: Global demand is surging. Over 800 million people around the world are undernourished, while nearly 2 billion people experience food insecurity. At the same time, one-third of food intended for human consumption ends up in the garbage.
Institutions have clear opportunities to patch gaps between supply and demand. Agtech and Foodtech companies are already hard at work in this space.
Spot and secure the real opportunities
The world is united in addressing the challenges of the day: Containing Covid-19, helping those who suffer its ill effects, and finding a cure. Meanwhile, investors will be looking to make sure that their portfolios and financial futures remain secure.
The current market pullback gives long-term investors a gateway into these here-to-stay megatrends. And while it’s important to understand general economic patterns, just remember that the biggest investment challenge lies in identifying genuine investments, and ensuring that whatever opportunity you choose supports your own financial goals.
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This article was written by J.P. Morgan Private Bank and produced by Quartz Creative and not the Quartz editorial staff. Sources are provided for informational and reference purposes only. They are not an endorsement of J.P. Morgan Private Bank or its products. Read J.P. Morgan Private Bank’s full legal entity, brand, and regulatory information here.