Sunday, January 6, 2013

Surprises and Megatrends for 2013 and Beyond

As we begin the New Year and assess various market dynamics and probable outcomes, the following two sets of “possibilities” are among the many ideas under consideration by both investors and policy-makers.

Last week, Byron Wien, Vice Chairman, Blackstone Advisory Partners, published  the following list ofTen Surprises for 2013 (a process he started in 1986 as Morgan Stanley’s Chief U.S. Investment Strategist):
  1. Iran announces it has adequate enriched uranium to produce a nuclear-armed missile;
  2. a profit margin squeeze and limited revenue growth cause a decline in 2013 earnings and the SP 500 trades below 1300;
  3. financial stocks reverse their 2012 gains;  
  4. Democrats sponsor a program to make the United States independent of Middle East oil before 2020 and West Texas Intermediate crude falls to $70 a barrel;
  5. Republicans make a major effort to become leaders in immigration policy;
  6. China’s Shanghai Composite Index will increase by more than 20%;
  7. climate change contributes to  crop failures, driving significant increases in grain and livestock prices,
  8. inflation remains tame, but gold rises to $1,900;
  9. the Japanese economy remains lackluster, but the Nikkei 225 trades above 12,000 and
  10. with Europe’ s structural problems largely unresolved, European equities decline by 10% in sympathy with the U.S. market
Separately, in itsGlobal Trends 2030” (Dec.2012) report, the National Intelligence Council  (reporting to the U.S. Director of National Intelligence) presented several long-term Megatrends including: 
  1. increased empowerment of the individual (driven by reductions in poverty, a growing middle class, greater educational access, broader use of new communication and manufacturing technologies, and health-care advances)  to solve mounting global challenges,  but individuals will also have greater access to lethal and disruptive technologies;   
  2. a diffusion of global power as Asia’s growth in GDP, population, military spending and technological investment surpasses North America and Europe. In addition China, India, and Brazil, as well as Colombia, Indonesia, Nigeria, South Africa, and Turkey will become especially important to the global economy;  
  3. aging, migration, and growing urbanization will increasingly impact most countries’economic and political conditions as the world’s population approaches 8.3 billion people (up from 7.1 billion in 2012 and 
  4. increased demand for food, water and energy resources will require proactive action by policymakers and private sector leaders to avoid a world of scarcity.

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