*This article is produced in partnership with BlackRock
BlackRock sees five mega forces transforming the global economy and presenting opportunities for investors in the near term.
The group describes these trends as the energy transition, demographic divergence, geopolitical fragmentation, digital disruption, and the future of finance.
At first glance, there’s nothing surprising or new about these themes.
In fact, many managers say the same thing, but BlackRock has unique insights and perspectives, leveraged from the group’s Investment Institute, which connects experts on macroeconomics, markets and portfolio construction.
According to Ben Powell, BlackRock’s chief investment strategist for APAC, investors can no longer view the world in terms of business cycles or temporary deviations around stable long-term trends. They must understand the forces shaping global economies to identify and capitalise on unique opportunities in both public and private markets.
“The mega forces we’ve identified are individually a big deal but collectively they are changing the world, particularly as they are occurring concurrently and overlapping,” he tells Professional Planner, citing the rise of artificial intelligence which consumes enormous amounts of energy to digest massive volumes of data, which then requires more digital infrastructure including data centres and cooling stations, which has implications for the energy transition, and places higher demands on capital markets.
“When you hear about this stuff all the time, it’s easy to brush over it but it really matters because the world has changed, and investors and advisers need to understand these themes, and keep them front and centre of their mind, to make informed decisions, construct robust portfolios and educate their clients.”
Powell is one of nine speakers that will front advisers at the BlackRock 2025 Wealth Symposium on 25 February in Melbourne, 26 February in Brisbane and 27 February in Sydney.
He will be joined by colleagues head of strategy for APAC wealth James McDaid, head of strategic partnerships Paula Gigler, and director of wealth James Waterworth.
Reflecting on the past 12 months, Powell describes 2024 as a “weird” year when investors were both hawkish and bullish. This unique stance is further evidence of how much the market is changing, he says.
“For 20 years, the US Federal Reserve was broadly supportive so there was an everything bull market and it was really about trading in a cycle,” he says.
“There was a trend growth rate and a business cycle around that, and investors had to figure out where in the cycle we were at. But that’s clearly not the game anymore.”
Of course, in 2024, the US Federal Reserve ended up delivering far fewer rate cuts than the market expected and yet, US equities continued to climb higher.
The cause of this, according to Powell, was the impact of the mega forces, particularly digital disruption and the rise of AI.
“These forces are substantially informing the macro views [of professional investors] on geopolitics, domestic politics and economics, which has investment implications,” Powell says.
“It calls into question many long-held investment principles, as we’ve seen with the dismantling of the 60/40 mix of stocks and bonds. As mega forces reshape whole economies, investors should focus more on themes and less on broad asset classes and, with a wide range of potential outcomes, reassess their portfolios more often.”
As one of the world’s largest institutional investors, BlackRock is not just sitting back and observing the mega trends as they unfold. These trends are a fundamental input into the group’s investment process.
Tellingly, the title of the group’s 2025 Global Outlook paper, which will be presented at the Wealth Symposium, is ‘Building the transformation’.
“We’re not just observers of this transformation, we’re participants. We’re investing in these themes, alongside governments and other investors,” Powell says.
Increasingly, this investment is being directed to private markets, as investors seek to benefit from potentially higher yields, lower volatility and stronger diversification.
And it’s not just institutional money at play. Demand for private assets is strong and growing among wholesale investors, led by family offices and high net worth individuals (HNWIs).
Given the enormous need for investment in areas like decarbonisation, digitisation and infrastructure, this is a positive development, Powell says.
“Some market participants want to pretend that it’s still like the good old days of a normal trend growth business cycle but these mega forces create much bigger opportunities that need funding. Capital markets are extremely important for all five trends, which is why the future of finance is an overarching mega force,” he says.
With some governments, particularly Western governments, constrained by high levels of public debt, private capital is essential for financing the future, particularly a broad infrastructure build out.
Based on a report by the G20-backed Global Infrastructure Hub, US$94 trillion ($153 trillion) of investment is needed through to 2040 to close the infrastructure financing gap.
The report estimates that annual infrastructure investment must rise from 3 per cent to 3.5 per cent of global GDP, representing around US$3.7 trillion per annum.
Underpinning the need for this increased spending are demographic changes, namely significant population growth, another one of BlackRock’s mega trends.
“Private markets will play a pivotal role in providing the [infrastructure] funding needed,” Powell says.
“They can provide exposure to broader sources of credit as well as to early-stage growth companies driving AI adoption.”
To register for BlackRock’s CPD accredited half-day adviser event:
