Investing themes to watch over the next decade Investing themes to watch over the next decade Investing themes to watch over the next decade

Investing themes to watch over the next decade

Christopher Dembik

Head of Macroeconomic Research

Summary:  In a world of QE infinity and lowflation, there is no other alternative than stocks for investors seeking yield.

I recently had the opportunity to deliver a speech about investment returns over the next 30 years at the 5th International Funds Summit. Since then, I have received many requests from clients to have access to the presentation (here). I will try to sum up my main takeaways below. Please accept my apologies if I don’t cover everything and if my predictions don’t always come true. As the Nobel laureate in Physics Nils Bohr said: “Prediction is very difficult, especially if it’s about the future”.

In my view, we are in the middle of a new Schumpeterian cycle of innovation and I expect the process of destructive creation will speed up in coming years, leading to the break up of many companies and sectors, including but not limited to:

  • Banking as we know it today
  • Fund pensions
  • Tesla
  • GAFA
  • National airlines companies
  • The desktop computer
  • High oil prices
  • FIAT money

This fifth wave of innovation, that began in the early 1990s, is characterized by low growth, low productivity and lowflation. Unlike the fourth wave of innovation that lasted from 1950 to 1990, which has seen among other things the impact of electronics and aviation on the economic system, the current period is characterized by low productivity in most countries that ultimately leads to decreasing potential GDP growth. There is no single explanation for low productivity, but it is certainly partially linked to the fact that current innovations do not create new industrial sectors, as was the case in the past.

Our main call for the coming years is that lowflation is the new normal. Below, this is one of my favorite charts. You can see that US birth as a % of total US population leads US Core CPI by 30 years. It shows the direct impact of ageing on the evolution of inflation. On the top of that, new technology, oligopolies and global debt accumulation are other strong structural forces driving inflation lower. In the developed world, we are getting used to CPI under 2% but what is probably most striking, and less commented, is that inflation is also decelerating at a very steady pace in Emerging countries, where it used to be very high. Based on the latest data, average inflation in the BRICS + Indonesia is around 3.5% YoY versus an average of 7% in the immediate post-GFC.

I used to be skeptical about the risk of Japanisation of the economy but, as a matter of fact, we are facing this issue. Like in Japan, ultra-accommodative monetary policy has little positive effect on growth, negative rates mostly cause financial disruption, inflation is stuck to very low levels and structural factors, such as ageing, are becoming the most important drivers of long-term growth. And, like in Japan, the cost of pretend and extend is increasing. We are all well-aware that monetary policy is not the right tool to stimulate the economy and the disadvantages of negative rates surpass the advantages, but we are doing more of the same and we are slowly reaching the point where central banks are becoming market makers in some market segments. This is already the case in the euro area sovereign bond market. Based on our calculations, central banks at the global level (including the ECB) own around 70% of France’s public debt and around 80% of Germany’s public debt.

At some extend, I tend to agree with some of my colleagues that consider the stock market is the economy. We – and I mean mostly policymakers – cannot afford the stock market falls, as it would lead to contagion effect to the real economy. So much liquidity has been injected in the stock market over the past years, it is now almost impossible to withdraw it. The only solution is to keep injecting liquidity, which explains why around 60% of central banks are easing globally. This is the highest level since the GFC. Higher interest rates and QT are virtually impossible in a world of debt. Looking only at USD-denominated EM debt, it is reaching 3.7 trillion USD, which represents an increase of 156% since 2008. This debt burden is not manageable if interest rates considerably increase. Policymakers are not ready to accept the social cost resulting from the end of the expansionary monetary policy.

What does it mean for investors? If Japan is an example of what the future may hold for many countries, notably in Europe, it is likely that investors will favor the equity market over the bond market. In the chart below, you can see that equities have become the most attractive investment over the past 30 years in Japan. It is easily explained by the fact that the BoJ’s monetary policy has fueled the stock market, especially export companies that have benefited from lower JPY. This may sound paradoxical but, in coming years, it is highly probable that the stock market will continue to perform quite well, and that PER will keep increasing. It does not mean that financial imbalances do not matter anymore. For instance, it is worrying that hedge funds continue to be crowded into just the same 5 tech stocks (Microsoft, Amazon, Facebook, Alibaba and Alphabet) but, in a world of QE infinity and lowflation, there is no other alternative than stocks for investors seeking yield.


Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (
- Analysis Disclaimer (
- Notification on Non-Independent Investment Research (

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.