Panel
Moving Beyond Financials: Mega-Trends Shaping Business and Finance | Global Conference 2024
Milken InstituteHiromichi Mizuno, Raphael Arndt, Saira Malik, Jonathan Goldstein, Andy Sieg, Hiro Mizuno, Raf
- The "longevity revolution" is expected to drive business adaptation across nearly all industries within the next few years as average lifespans exceed 100 years, extending planning horizons from 60–80 years to a multi-century timeframe.
- Over $80 trillion in wealth is projected to transfer between generations in the near future, while another $100 trillion in global wealth is forecast to be created over the next decade alongside the addition of two billion people to the middle class.
- One-third of millennials and one-third of Gen X are anticipated to use social media for financial information, a shift that may lead to a bifurcation in investment strategies ranging from passive indexing to chasing meme stocks if financial literacy remains inadequate.
- Wealth disparity is predicted to cause a seismic societal and political shift in the short to medium term, potentially costing capital markets significantly if left unaddressed, with market pricing likely to focus on near-term certainty like Fed rate cuts rather than long-term ESG risks.
- The upcoming wealth transfer is not expected to be uninterrupted due to younger cohorts rejecting the status quo, which may drive demands for wealth redistribution through inheritance, income, and capital gains taxes.
- Economic conditions are forecast to shift away from "easy money" toward structurally higher inflation and interest rates, leading to lower equity market returns despite continued confidence in the US market.
- Portfolio construction is expected to evolve from a traditional 60-40 split into a 50-30-20 allocation (50% equities, 30% fixed income, 20% alternatives) to manage higher correlation risks, with increased inclusion of infrastructure, private credit, private equity, farmland, and real estate.
- Younger generations are predicted to demand diverse workforce representation, sustainable brand messaging, and AI-driven portfolio management, viewing investments as signals of identity and refusing to compromise returns for social goals without improved technology.
- Geopolitical risks are expected to heighten if the US opts out of global debates, potentially creating a world resembling the 1930s, with markets treating such issues as unpriceable "black swan events" despite strong earnings growth in sectors like the "Magnificent Seven."
- Government intervention is anticipated to increase regardless of election outcomes, with younger generations seeking stronger institutions, intrusive government support, and broader metrics for "wellbeing" alongside GDP growth.
- Institutionalization of capital, such as superannuation systems, is expected to influence long-run value creation, while ESG metrics will likely be integrated into investment processes only where financially material, such as regarding stranded assets in energy.
- Financial education is expected to require a shift toward teaching first principles and geopolitical risk scenarios to counter backward-looking methods and foster non-consensus thinking through hiring from a wider array of schools.
- Regulatory frameworks for carbon and biodiversity reporting are expected to be implemented consistently in the near future, while the industry must develop new business models rather than reslicing existing ecosystems to meet evolving client expectations.
- Women becoming financial decision-makers are forecast to have a profound impact on global portfolio construction that may exceed specific ESG considerations, while the use of tracking error as a primary metric is viewed as a governance problem needing reframing.