Two broad themes I expect to guide my investment decisions for the next decade:
(1) On-going maturation of economies in Latin America and Asia. Increasing GDP per capita in these regions should drive increasing demand for basics (food and clothing), enabling investments (such as improved communication), and luxury items.
Based on this outlook, I plan a more passive investment approach focused on a basket of country-focused ETFs. Improving economies and strengthening emerging currencies are broad trends I expect to play. As far as allocation, I expect my portfolio to maintain around 50% exposure to this trend.
(2) Price Volatility in U.S. and Europe. Bubbles formed and popped as the allocation of capital is swirled by activist monetary policy, exasperated by the three-D's - Debt, Deficits and Defaults. Regulation and austerity are likely dominant themes with more focus by business on improving returns than growing its capital base.
The second trend suggests skill as a stock picker will be at a premium. It also suggests a business community more uncertain about making investments, in general, resulting in minimal growth over 5-10 years. At a micro level, managers will need to remain nimble, adjusting prices to offset cost fluctuations and demand trends. We may collectively go through greater booms and deeper bottoms. This will put a premium on manager quality. I will look for unusual market dynamics that may lead to bubbles, management quality, and healthy secular trends driving specific companies.
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