Macro Trends in Financial Markets

Catherine Alexander
Partner

As we have all seen, economies and markets are not static and they move and change on multiple levels, macro trends are shifts that are on the largest scale, involving international economics and their cycles. They affect the finances of entire nations, as well as having a trickle-down effect for you and me.

The current major macro trends can be broadly broken down into the following four themes:

• Sustainability, climate change and resource conservation.
  Significant policy focus in EU and US.
  Considerable subsidies applied to infrastructure projects.
  Renewable energy capacity increased in wind and solar farms.
  Carbon capture and storage assets.

• Digitisation incorporating Technology and AI.
  Big data, AI and machine learning acceleration.
  Developments in robotics and automation to drive efficiency.
  Associated support services for infrastructure needs.

• Living longer and healthcare provision.
  Shrinking labour forces and increasingly elderly populations.
  Declining fertility rates and challenges around immigration.
  Growing emphasis on well-being and leisure.

• Consumer consumption preferences and deglobalisation.
  Weakening global economic integration and political cooperation.
  Permanent reconfiguration of supply chains.
  Global impact of inflationary pressures and interest rates.

These trends are likely to be significant determinants of long-term investment performance and capital allocations in real assets for years to come, and therefore greatly influence portfolio allocations.

Jessica Amodio
Independent Financial Adviser and Partner at GDA

"We are likely to see results of an election in both the US and the UK during 2024. The direction that the votes flow, will likely determine the direction of home and geopolitics for the next years to come. Some may correctly call the outcome, but the effect on the markets cannot be guessed as there is generally no pattern on how they react. As ever, our advice is to plan for long term growth, ensure portfolios are diversified, and don't be reactive to short term volatilities.”

Joseph Middleton
Independent Financial Adviser at GDA

"“In the past few years we have experienced inflation at extremely high levels not seen for many years, this trend has been reversing over the past 6 months to a year as a result of higher interest rates, and consumers are buying less to cope with the cost of living crisis amongst other reasons. US inflation peaked at 9.1% in June 2022, but more recently in February 2024, this has come down to 3.2%*. We can also see similar trends in Europe, where UK inflation peaked at 9.6% in October 2022 before coming down to 3.4% in March 2024**.

Moving forwards, we expect inflation to remain at these lower levels and this should be positive for the market. Inflation erodes the spending power of your money and destroys value; markets have historically performed better with more consistent lower levels of inflation than when inflation has been running rampant like in the past few years.”

Tarana Uddin
Trainee Paraplanner at GDA

“In the UK and around the world, AI is changing how we get things done, and this includes the financial services sector. This includes how we trade, especially with algorithmic trading. This means using smart algorithms to automate complex strategies, ensuring trades are not just quicker but also more informed. We can look at changing consumption patterns that are underpinned by shifts in society and identify investment opportunities at different stages. Leveraging technology is a major macro trend that will affect financial markets moving forward.”

*2024. US Bureau of Labor Statistics: 12-month percentage change, Consumer Price Index, selected categories. https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm.

**2024. Office for National Statistics: Inflation and Price Indices. https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/l55o/mm23.

This article isn’t personal advice. If you’re not sure whether a course of action is right for you, ask for financial advice.