The new abnormal and its seismic shifts

From the pages of In Business magazine.

Investment outlooks come and go, but trends are, well, trendy, and the global economy features plenty of them. Dave Heidel, regional investment director for The Private Client Reserve of U.S. Bank, says many of the factors affecting capital markets are not just transitional, they are serious, long-term shifts. He speaks of seismic and generational changes, such as:

  • Much of the developed world is stuck in a disinflation-to-deflationary mode with populations that are either stagnant or shrinking — and definitely aging. China, which is vying to surpass the U.S. on many fronts, has a flattening trajectory due to its one-child policy. As a result, China’s population is going to peak in the near future, and the country needs to “get rich before it gets old,” Heidel says.
  • The United States will be well-positioned if it can reform its immigration system. In Europe and Japan, aging populations mean persistently declining workforces. While the U.S. is also aging, we’re still increasing our population at a pretty good clip, primarily because of immigration. “Regardless of what side of the political spectrum you’re on, immigration policy is going to be extremely important if the U.S. is going to continue to grow demographically and look different from its peers in Europe and Japan,” Heidel notes, adding that a lot depends on whether the U.S. is able to attract talent from beyond its borders.
  • The U.S. oil revolution is a global game-changer. Thanks to fracking technology, abundant natural gas, and vast shale oil reserves, we are now the king of energy-producers. While American consumers will continue to see up-and-down movement in the price of oil and gyrations in the level of productivity, this new reality is an “unmitigated, massive positive” because we’re more in control of our destiny, Heidel states.
  • The European Union experiment will continue. European countries have gathered into a unified union of currency, but the difficulties of combining different nations are apparent. So why bother? Because the dream of European unity is founded in the twin tragedies of World Wars I and II, when the continent was decimated. “In all likelihood, whatever strange bedfellows the European countries make,” Heidel notes, “the people of Europe will likely try to keep the EU together as best as they can.”

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