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Why fragmentation and personalization are key for investing in 2020

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The UK General Election that just passed is a crucial mega trend that holds many lessons for the deep trends underlying financial markets today. Besides being a victory for one political party over another, it also represented a triumph of nationalism over ideology. Boris Johnson had one simple and effective campaign message: Get Brexit Done. This pragmatic assertion of national politics was confronted on the other hand by the arch-ideological stance taken by his opponent Jeremy Corbyn who advocated a revolution in the ownership and distribution of economic power.

The election also represented a triumph for all of those who voted in the 2016 Brexit referendum. For over three years, the democratic will of the people had been consistently thwarted by the political class in Westminster, the civil service, media, business and financial interest groups all of whom were intent on preserving the status quo rather than respecting the democratic process.

These two trends are reflective of the two mega trends that are driving global politics and economics around much of the world. The first mega trend I refer to as fragmentation. The entire institutional framework that has governed the world for decades, centuries and even millennia is crumbling: in the age of the Information Revolution when information is being produced bottom up rather than top down and is being freely distributed, all of those institutions that managed the world top down are no longer fit for purpose. The United Nations, the nation state, political parties, governments, corporations, banks, media, religions and universities must all adapt to a world in which they no longer hold a monopoly on information and ideas. Or die.

Another vital mega trend you must watch in 2020

The second mega trend is the empowerment of the individual. The same forces that have shaken the foundations of the old order are putting economic and political power directly in the hands of individuals all struggling to evolve new organizational structures distinct from the old. Witness the Extinction Rebellion protests, the rioting in Hong Kong and other popular uprisings that are taking place outside the confines of the normal political process.

The implications of these new trends are immense. Everything we know about the world is changing. No one has yet constructed a vision of what a new world order could look like – one in which individuals rather than institutions hold the power.

From a financial markets perspective the prognosis for 2020 might be as follows:

  • Technology is going to accelerate rather than decelerate as a theme
  • Social purpose will become a new fundamental factor in the determination of corporate value
  • Markets will remain hostage to unforeseeable political tensions

2020 promises to be a bumper year for investment returns. It will be important to use that opportunity to build portfolios that can benefit from the entire social, economic and political transformation ahead of us.

About the Author

Kerim Derhalli is the CEO and Co-Founder of Invstr.

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