Key shifts in global economies and the rise in technology and digitisation have led to a wholesale shift in capital investment from fixed assets to intangible digital ones, argues Viktor Shvets, Head of Asia Pacific and Global Strategy at Macquarie Capital, which don't have the same capacity constraints and so don’t generate inflationary pressure.
As such, he says, these ‘new age investments’ are likely to be disinflationary and pose a unique set of challenges for investors and central banks alike.
Technology driving global economies
Technological revolutions continue to have a significant impact on global economies, and we are in the midst of another technological wave, Viktor says, that’s changing everything from societies to politics, how we communicate, the value of labour inputs and what type of capital is preferred and the value of that capital.
This current wave, which started around 1980, saw the introduction of digital technologies, marking the start of hyperconnectivity through the adoption and proliferation of mobile devices, social networking, and even computing clouds.
More than that, we are also seeing a change in how digital technologies are altering business models and industries, spurring changes in the functioning and flexibility of capital, how labour markets behave, and how debt and capital markets behave, as shared by Viktor.
“In an industrial age, capital was inflexible; it has a very severe capacity limitation. Today, capital is incredibly flexible. It has almost no capacity limitation of the previous era. It has a synergistic impact and a spill over impact.”
Viktor also shares that the same applies to the labour market, where we are seeing a shift from employing people in the conventional occupations to service and gig economies, reducing the human limitations of productivity and efficiency.
Technology is reclassifying the “old and new economy”
With technology reshaping our world, the need to consider how organisations are using technology and information is more important than ever, as organisations are constantly evolving in the way they conduct businesses. Terms like “old economy” and “new economy” become more and more obsolete, as more organisations are leveraging the capabilities of technology to rethink their business models.
Instead of putting companies into boxes, Viktor believes that assessing how organisations are using technology to their advantage would capture a more accurate representation and spirit of the new age.
In looking ahead, Viktor believes that inflationary-disinflationary trends will continue to drive flows to various sectors and investment styles in the short term, stating that traditional sectors such as conventional energy, financials, and opening markets will perform much better.
In the longer term, however, he says that organisations able to adapt to the digital age and grow through their use of information and technology, despite the disinflationary period that we are currently experiencing, will thrive.
This, he says, will lead to more ‘thematic’ investing, whereby investment strategies increasingly look at macro-level trends and the businesses and sectors that are best set up to identify and capitalise on these – such as electric vehicles, green energy, biotech and robotics.