The seven key macroeconomic trends shaping next few years are as follows:
(I)-The Eurozone debt crisis remains key burning issue. The tightened monetary and fiscal policy is sucking oxygen from the already enervated European economies. The key challenge remains: How will Europe cut budget deficits without killing growth?
(II)-Two demographic trends are driving the investment landscape in the next decade. There is an explosion in the number of pensioners and longevity of people, in particular in the developed world, due to advances in science and medicine. This will put further stress on governments already reeling under debt burden.
(III)-The great bubble of Sovereign debt is gestating-from the US to Japan to a number of European countries. Official US government debt is already 90% of the GDP. The US debt in real terms and after factoring in unfunded obligations for Medicaid, government pensions and other liabilities is over 300 percent of GDP.
(IV)-It cannot be ruled out that escalating global debt and sluggish growth are likely to continue for the next decade. The situation can be impacted negatively with three trends: rising unemployment, end of cheap oil and depreciating currencies (dollar in particular).
(V)-Creation of currency out of nothing, often called as quantitative easing would lead to depreciating value of dollar, higher interest rates to attract buyers of bonds and finally an era of hyperinflation. It cannot be ruled out this hyperinflation may be preceded by an era of a higher deflation and sluggish economic growth.
(VI)-Gold, notwithstanding its recent volatility, will continue to provide a decent hedge against inflation and depreciating currencies. Bullion will also protect against surging oil prices.
(VII)-Exchange Traded Funds of precious metals and other Alternative Investments like Participating Whole Life Insurance will provide better returns than fixed income securities like GICs, Treasury Bills, US bonds or other traditional investments.
DISCLAIMER: The views expressed in this Blog are my personal views/analysis. It does not represent views of any organization or group, for which I am doing consulting or employment. The purpose of this blog is academic and informative; and is not sale of any product or service. The author does not own responsibility (liability) for any information presented in this blog; as investment information tends to change rapidly.