Technological Disruption (T)
Technology disruption has historically reshaped investment themes by fundamentally altering industries, creating new markets, and displacing established ones. Each wave of innovation—from the industrial revolution to the rise of the internet—has redefined the value chain and recalibrated how capital is allocated. Investors who correctly identified these shifts reaped substantial rewards by positioning themselves early in growth sectors.
Historically, investment in the direct beneficiaries of disruption, such as specific tech companies or platforms, has delivered impressive returns, but with significant risk. Interestingly, fewer than 10% of companies that emerge as leaders in a disruptive technology sector maintain that dominance for more than a decade. In contrast, the “pick and shovel” strategy—focusing on the tools, infrastructure, and services that enable disruption—offers more resilience and less volatility.
The acceleration of technological change continues to reshape industries and economies. From artificial intelligence to automation and quantum computing, technology will revolutionize sectors ranging from healthcare to manufacturing. For instance, AI alone could contribute trillions of dollars to the global economy by 2030, driving massive shifts in labor markets and supply chains. Investing in enabling technologies, such as data centers for AI or semiconductor equipment manufacturers, provides a diversified way to capture value while minimizing exposure to the volatility of specific disruptors.
Increasing demographic shifts (I)
Aging demographics represent one of the most significant long-term investment themes of the 21st century. As life expectancy increases and birth rates decline, many developed countries are experiencing a rapid rise in the proportion of elderly populations. By 2050, it is projected that over 2.1 billion people will be aged 60 or older globally, nearly doubling from the 1 billion in 2020. This shift creates both challenges and opportunities, particularly in healthcare, as aging populations will require more advanced medical care and solutions to manage age-related diseases.
Biotechnology plays a critical role in addressing the needs of aging populations. As the elderly are more susceptible to chronic diseases, such as cancer, Alzheimer’s, and cardiovascular conditions, biotech innovations have become essential for developing new treatments, diagnostics, and preventative measures. The global biotech industry is expected to grow to >$2 trillion by 2028, driven largely by the increasing demand for personalized medicine, gene therapies, and innovative biologics that cater to age-related ailments.However, investing directly in biotech companies carries significant risks due to the lengthy and costly process of developing new drugs, which often results in clinical trial failures or regulatory delays. A more stable approach is the “pick and shovel” strategy—investing in the biotech tools and infrastructure that enable this sector’s growth. These tools, such as gene sequencing platforms, laboratory equipment, and diagnostic technologies, provide essential support to biotech firms without the risks tied to individual drug development outcomes.For instance, the global market for gene sequencing tools alone is expected to exceed $50 billion by 2030, growing at a mid to high teens compound annual growth rate (CAGR). As biotech companies increasingly rely on these platforms to develop personalized medicine and advanced therapies, the demand for enabling technologies will remain strong. Similarly, the market for laboratory automation tools is projected to grow by nearly 9% annually over the next decade, driven by the need for more efficient drug discovery processes.
This “picks and shovels” approach in the biotech sector allows investors to benefit from the long-term trend of aging demographics while minimizing the risks associated with specific drug companies. The continued advancements in biotech tools will be critical in driving the innovation needed to manage and treat the health challenges that accompany an aging world population.
Deglobalization(D)
Deglobalization, the gradual unwinding of global trade and economic integration – partially pertaining to the geopolitical risks, presents a long-term investment opportunity for those who can navigate the evolving landscape. While globalization defined much of the late 20th and early 21st centuries, the trend towards deglobalization has been building for some time, driven by political shifts, trade tensions, and supply chain vulnerabilities. Notably, global trade as a percentage of GDP peaked in 2008 at around 61% and has been declining since, falling to around 52% by 2022. The COVID-19 pandemic, geopolitical conflicts, and trade wars have only accelerated this reversal, bringing new opportunities for investors.
For long-term investors, deglobalization opens doors to sectors and industries that stand to benefit from the restructuring of global supply chains and the emphasis on regionalization. Manufacturing, logistics, and infrastructure development in key markets are areas poised for growth. For instance, as companies “reshore” or “nearshore” production to reduce reliance on foreign suppliers, domestic manufacturing hubs are likely to expand. The U.S. manufacturing sector has already seen a resurgence, with manufacturing output growing by 4.9% in 2021, driven in part by reshoring efforts and increased government incentives.
Moreover, supply chain disruptions, highlighted by events such as the U.S.-China trade war and the semiconductor shortage, have underscored the risks of global dependency. In response, governments and companies are diversifying their supply chains, moving from global “just-in-time” models to more resilient, regionalized approaches. This shift presents long-term opportunities in industries such as robotics, automation, and smart manufacturing technologies, which will be essential to making domestic production more efficient.
Energy independence is another area where deglobalization creates investment potential. As countries seek to reduce their reliance on foreign energy sources, particularly in the wake of conflicts like the Russia-Ukraine war, there will be substantial investments in local energy infrastructure and renewable energy. Global investments in renewable energy are expected to reach >$4 trillion by 2030, with much of this driven by the desire for energy security in a more fragmented global economy.
The deglobalization trend also offers opportunities in cybersecurity, as companies and governments prioritize securing critical infrastructure and supply chains in a more divided global environment. The global cybersecurity market is projected to reach >half a trillion USD by end of this decade, growing at a CAGR of double digit CAGR, as businesses aim to protect sensitive data and operations from increasingly sophisticated threats. While deglobalization may limit some of the efficiency gains achieved through global trade, long-term investors can benefit from this trend by focusing on sectors that enable regional self-sufficiency, energy independence, and secure supply chains. By aligning portfolios with the industries driving these changes, investors can capture value as the world shifts towards a more fragmented but resilient economic structure.
Extreme Financialization(E)
The concept of financialization challenges the traditional understanding of economic cycles. Many argue that the increasing dominance of financial markets has fundamentally changed how economies function, to the extent that the “normal” cycles of booms, busts, and recoveries no longer operate as they once did. In this financialized world, central banks and their monetary policies play a disproportionately large role in driving growth and stabilizing markets. Liquidity injections, ultra-low interest rates, and asset purchases have artificially inflated asset prices, with central banks becoming the primary arbiters of economic stability.
Since the 2008 financial crisis, global central banks have injected trillions into the financial system, replacing the natural forces of supply, demand, and productivity with financial interventions. As a result, traditional cycles of expansion and contraction have been disrupted. Instead of experiencing the typical phases of overheating and cooling off, markets remain highly dependent on financial engineering, with asset prices continuously propped up by liquidity.
For instance, following the COVID-19 pandemic, stock markets rebounded swiftly, not due to organic economic recovery, but because of unprecedented stimulus measures. The S&P 500 surged more than 70% in 2020, even as global economies struggled with recession. This decoupling of financial markets from real economic performance signals the diminished role of traditional economic cycles.
In this new paradigm, downturns and corrections are no longer followed by natural recoveries. Instead, they are mitigated by further liquidity injections and policy interventions, keeping economic volatility in check but also introducing long-term risks. For investors, understanding the implications of financialization is crucial. The absence of traditional cycles requires more adaptable long-term investment strategies, as markets are now driven more by central bank policies than by underlying economic fundamentals. One consequence of this shift is the growing wealth gap, which has historically benefited ultra-luxury companies—a trend likely to continue.
In a Nutshell …
The ability to navigate these megatrends lies in identifying choke points—industries or companies that provide essential services or tools in critical areas—or in recognizing themes with significant secondary impacts. In this transformative period, focusing on high-quality businesses with durable competitive advantages and visionary leadership will be essential for sustained growth. These companies, positioned to benefit from long-term shifts like technological disruption or demographic change, can thrive even in uncertain conditions.
Moreover, as the economic landscape becomes increasingly influenced by policy interventions and financial engineering, investors must be adaptable, recognizing that traditional cycles of boom and bust may no longer apply. Identifying businesses that are resilient, can leverage intangible assets, and successfully navigate evolving geopolitical and economic environments will be critical. Though the next decade will present challenges, the opportunities are immense for those who focus on companies that harness these megatrends and remain flexible in the face of disruption.
(The author Arindam Mandal is Head of Global Equities at Marcellus. Views are own)
