Mega forces are big, structural changes that affect investing now – and far in the future.
BlackRock’s has identified five “Mega Forces”. These forces encompass demographic shifts, technological advancements, geopolitical dynamics, financial innovations, and sustainability initiatives.
According to BlackRock, these key drivers are changing long-term growth and represent major shifts in profitability [of firms] across sectors and geographies. The “mega-forces” identified by the BlackRock:
• Demographic divergence – splits occurring between well-established, aging economies – and those of younger, emerging economies.
• Digital disruption and AI – key technologies are transforming how we live and work.
• Geopolitical fragmentation and economic competition – globalization is being “re-wired”, and splitting into competing blocs
• The Future of finance – characterized by evolving, fast-changing financial architecture (for households and companies), and impacting transactions and investing.
• The transition to a low-carbon economy – setting the stage for the massive capital re-allocations.
BlackRock highlighted the low-carbon transition as a major “mega force” poised to create significant investment opportunities in 2024. The firm anticipates a substantial reallocation of capital towards clean energy, electrification, and climate resilience. These investments will be driven by the necessity to overhaul energy systems and prepare for climate hazards, alongside efforts to rebuild after climate-related damage.
One of the key “potentially market-moving developments” identified in the report is the ongoing long-term reduction in battery prices. Factors such as an 80% drop in lithium prices, intense competition, and technological advancements are expected to drive significant further price cuts. BlackRock notes that lower battery prices could lead to reduced final purchase prices for clean technologies, including power grid energy storage systems (batteries to store unused solar and wind-power) and electric vehicles. (The price of lithium is way down the authors note; this is a key element of battery manufacture. The institute cites 1/3 of production cost in some clean energy technologies is cost of batteries.)
The report also notes a series of elections in 2024, including in the U.S., EU and India, with results having significant implications on policy as governments balance often competing objectives such as decarbonization, energy security and energy affordability, which will likely impact areas including clean technology, as well as “the path of the low-carbon transition more broadly.”
In the report, BlackRock said:
Bottom line: We think falling battery prices could boost the EV and energy storage industries this year. Much depends on the direction of global transition policy after key elections as we weigh transition-related investment opportunities and risks. As physical climate risks mount, we believe climate resilience could come to the fore as an investment theme.
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