Spotting an era-defining trend is one route to outsized returns. What can we learn from the last 75 years?
Cris Sholto Heaton Investment columnist
Look back over many decades and you can spot a handful of big themes that dominated markets for five or ten years at a stretch. They were rarely the only way to make money, but latching onto one of them at the right time was a huge help.
We are clearly in a different economic regime to a few years ago, so it’s worth considering what will be the defining theme of this era. That’s easier said that done – but one starting point is to identify the top themes of the past 50 or 75 years.
For the past decade, the answer was tech. You could make outsized returns in other sectors (eg, luxury), but tech has dominated the discussion. Rock-bottom interest rates were the key characteristic of our era, but you would have made less from directly betting that rates would stay low than buying the big tech boom that they helped fuel. That’s an important lesson about finding the best way to profit from an insight.
In the 2000s, we had many choices. Emerging markets, energy and natural resources, and gold were all linked: the rise of China and other emerging markets drove demand for commodities and probably precious metals. The other big theme was the real-estate boom, which ended in disaster and the global financial crisis, but was all that many people cared about at the time.
More tech and emerging markets
Most investors would again pick tech for the 1990s, but there were notable differences to the 2010s. First, the recent bull run was driven by established large caps that were still achieving spectacular growth. Conversely, while there were profitable stocks in the dotcom bubble, very speculative start-ups played a bigger role. Second, tech came to prominence later in the decade. Before that, emerging markets were arguably the centre of the hype, before they started to run out of steam in
