Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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Rapid urbanisation
ETFs
iShares
Summary: Changes in global demographics will bring significant challenges and opportunities for societies and businesses. Longer lifespans combined with modern lifestyles are likely to change medicine and consumer habits. The forces that underpin this megatrend include ageing populations, the outlook for future jobs, immigration pressure, skills imbalance and different priorities of younger generations.
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
As cities grow large, they require significant infrastructure, including communication networks (e.g. 5G, fibre), transit and transportation (e.g. metro, bridges), social infrastructure (e.g. hospitals, schools) and housing. Everything needs fundamental development and constant change: from efficient technology to constant connectivity and state-of-the-art devices that make our future tangible. In the last few years, new business models that rely on online platforms and dense populations have sprung up in many countries. Examples include online takeaways, last-mile delivery and the sharing economy. Many of them originate in large cities before they gain scale and expand elsewhere. In some countries, the city of tomorrow is already a bit of a reality, in others it is still being planned. But no matter how you look at it: the future remains exciting, and an exciting investment opportunity.
Megatrend in three stats
- It’s estimated that by 2050 more than 8.8 billion people will live in cities. Double of that today at 4.4 billion. 1
- In London in 2022, every driver was stuck in traffic jams for an average of over 156 hours. 2
- By 250, worldwide municipal solid waste generation is expected to have increased by roughly 70%.3.
Investing in the trend
Megatrends are broad drivers of global change, identifying more focused themes which tap into one or more megatrends allows you to invest in these opportunities. For rapid urbanisation you could use a holistic theme such as smart city infrastructure investing in companies responsible for shaping sustainable cities of the future, across the sub-themes of resource efficiency (water, energy, waste), urban connectivity (mobility and 5G), and citizen well-being. Alternatively, a more targeted theme may appeal to you, such as electric vehicles and driving technology - providing access to companies delivering clean and innovative driving solutions which will shape the way we travel around and between cities.
Sources:
- Source: World Bank, Urban Development overview, as of March 2023
- Source: Inrix, as of March 2022
- Source: Projected generation of municipal solid waste worldwide from 2016 to 2050, Statista https://www.statista.com/statistics/916625/global-generation-of-municipal-solid-waste-forecast/ as of 31.08.2023
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