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.
The report highlights the potential for physical damage from extreme weather events, noting the World Meteorological Organization’s recording of 2023 as the hottest year on record, to drive an increase in interest in climate resilience as a new investment theme. Examples of opportunity areas noted in the report included “early monitoring systems for floods, air conditioning to cope with heatwaves or retrofitting buildings to better withstand extreme weather.”
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.”
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