Investment Themes by Decade: What’s Next?

Drawing insights from data analysis conducted by Morgan Stanley Investment Management, the distinct investment landscapes of each decade come to life in vivid detail. Over the course of 10-year intervals, specific asset classes, sectors, or regions have consistently seized the attention of investors, exerting a profound influence on returns and outshining other segments of the market.

Embarking on a journey through seven decades, since the 1950s, we witness the ebbs and flows of investment trends that have shaped the financial landscape.

In the 1950s, a resurgence swept through European stocks, riding the wave of post-war recovery. This surge found its momentum in substantial investments from both corporations and governments, marking a transformative period as Europe embraced integration.

Fast-forward to the 1960s, and investors eagerly flocked to the allure of blue-chip stocks in the renowned “Nifty Fifty,” with household names like Johnson & Johnson, Disney, and Coca-Cola capturing imaginations. The prevailing belief was in the enduring strength of these franchises to yield substantial returns over the long haul. However, the 1973-1974 bear market delivered a stark reality check as these stocks plummeted.

The 1970s, characterized by a staggering surge in oil prices from $3.35 to $32.50, witnessed a dominance of commodities. This era also saw emerging economy exporters of oil and gold basking in the spotlight amid production and output cuts.

Shifting gears to the 1980s, the spotlight shifted to Japanese stocks, experiencing a meteoric rise. By 1989, the Tokyo Stock Exchange commanded a staggering 41% share of global equities, surpassing the value of the U.S. equity market just two years prior.

With robust economic growth propelling the United States forward, the 1990s became the era of American tech stocks. Though the crash of 2000 claimed many high-flying tech stocks, survivors like Qualcomm, which skyrocketed by 2,620% in 1999, persisted. Notable entities such as Amazon and Cisco also weathered the storm.

Venturing into the 2000s, a shift unfolded as investors gravitated towards commodities and emerging markets, this time with a focus on the BRIC economies—Brazil, Russia, India, and China. The last decade, the 2010s, was a great run for large companies with growth stocks leading and the FAANGs in particular as technology permeated myriad industries, shaping the investment landscape in unprecedented ways.

All Eyes on AI Now

The previous decade was a pivotal moment where technology penetrated and reshaped diverse industries, leading to dominance of technology related stocks and changing how investments were made in ways we had not seen before. Moving forward to this new decade, technology related companies and stocks still prevail but as time goes on, older corporations like Reddit or Stripe are getting less interesting in the market.

The technology momentum has shifted to Artificial Intelligence now. Anything AI will get the market excites as many have perceived this is the way forward, the future to come. Although the excitement right now is in the AI space, none of the AI related companies are ready to go public yet. Most AI ventures are still in the phase of burning through cash, and the available capital seems to be predominantly directed towards AI endeavours.

Takeaway

As we reflect on the past seven decades, one notable trend stands out – the absence of consistent performance leadership. Each era has witnessed the emergence of a distinct asset class, marking a departure from the previous leader. Whether the upcoming decade will follow suit remains uncertain. Albeit all focus and capital seemed to be pouring into the AI space, however, in the face of this unpredictability, a well-rounded and diversified portfolio emerges as the most reliable hedge against the unknown.