About this episode
At a recent meeting of analysts from around the globe, we identified three central transitions for 2023 that may help investors shift towards a focus on long-term trends as opportunities. ----- Transcript ----- Welcome to Thoughts on the Market. I'm Michael Zezas, Head of Global Thematic and Public Policy Research for Morgan Stanley. Along with my colleagues, bringing you a variety of perspectives, I'll be talking about the intersection between public policy and financial markets. It's Wednesday, January 18th at 10 a.m. in New York. What do you get when 45 global research analysts gather in a room for two days to debate secular market trends? A plan. In particular, a plan to deal with a world where key underpinnings of the global political economy are changing rapidly. For investors, we think that means concentrating on multi-year secular trends as an opportunity. In markets where short-term focus has become the norm, it stands to reason that there's less competition and more potential outperformance to be earned by analyzing the market impacts of longer-term trends. That's why we recently gathered analysts from around the globe to identify the key secular themes that Morgan Stanley research should focus on this year. The agenda for our meeting included over 30 topics, but the discussion gravitated around a smaller subset of themes whose potential market impact was substantial, but perhaps beyond what analysts could plausibly perceive or analyze individually. Understanding these three global transitions appeared central to the questions of inflation, interest rates and the structure of markets themselves. The first is rewiring global commerce for a multipolar world, one with more than one meaningful power base and commercial standard, where companies and countries can no longer seek efficiencies through global supply chains and market access without factoring in geopolitical risks. We've spoken much about that in this space, but our analysts believe the practical implications of this trend are not yet well understood. The second is decarbonization. While this isn't a new theme, we think investors need to shift from debating whether it will be meaningfully attempted to sizing up the impact of that attempt. After all, 2022 saw both U.S. and European policymakers putting the power of government behind decarbonization. Now we'll focus on helping investors grapple with both the positive and negative market impacts of this transition, which the International Energy Agency estimates could cost about $70 trillion over the next 30 years. Identifying the companies, sectors and macro markets that will benefit, or face fresh challenges, is thus essential work. Finally, we'll remain focused on tech diffusion. Once again, not a new theme, but what is new is the speed and breadth with which tech diffusion can impact sectors that were previously untouched. Fragmented industries or those with high regulatory barriers look poised for a multi-year transition via tech diffusion. Opportunities may appear in finance, health care and biopharma. We expect the next five years of tech diffusion to move meaningfully faster than the last five, and so we'll focus on delivering important market related insights. So, you'll be hearing more from us over the course of 2023 on these three transitions and their impacts on markets. Thanks for listening. If you enjoy the show, please share Thoughts on the Market with a friend or colleague, or leave us a review on Apple Podcasts. It helps more people find the show.