Three long-term trends investors may want to consider

Investors are generally thinking about longevity. But that is particularly true this year, when it’s difficult to look past momentous events that are coming up quickly.

The year has started with markets hyper focused on exactly when the Federal Reserve will cut rates, while the biggest global election year in history is looming in the background. This is all the more reason investors may want to take a breath and think about three long-term themes that may l evolve and endure beyond the news and short-term market cycles. We retain two of our three themes from last year—artificial intelligence and decarbonization—while adding a new one: longevity.

Living longer has been an age-old human quest, but recent advances in medicine and technology are helping to make it a solid investment theme. In a little under two years, obesity drugs have reached blockbuster status, and Morgan Stanley Research estimates that the new treatments—which have shown they can also reduce the risk of heart attacks and strokes and could be contributing to healthier lifestyle choices—will become a $77 billion category in the next decade.

Meanwhile, a revolutionary approach to treating cancer, using a super-targeted way to destroy diseased cells while sparing healthy tissue, shows promise to revolutionize cancer treatment. This could help make so-called ‘smart chemotherapy’ a $140 billion global market over the next 15 years, up from roughly $5 billion in 2022. Add to that the potential for AI to speed the biotech and pharma innovation cycle, which could lead to an additional 50 novel therapies over a 10-year period, translating to a more than $50 billion opportunity. 

However, longevity’s impact spans far beyond the medical and pharmaceutical sectors. As more people live longer, there will be micro and macro ramifications for: 

• demographics and consumer habits
• the healthcare system
• government spending and
• long-term financial planning

This will create a nuanced array of opportunities and challenges that investors will need to consider carefully.

Generative AI is one of the most disruptive technologies since the smartphone, and its wide-ranging effects on labor and the broader economy are just beginning to emerge.

Morgan Stanley economists expect 40% of occupations to be affected by generative AI in the next three years, with associated labor costs of $4.1 trillion. In a prolonged tight labor market, accompanied by lackluster improvements in U.S. productivity growth, AI (and generative AI in particular) should help increase efficiency and output while lowering costs and opening new avenues for income in the gig-earner economy.

Beyond the direct tech plays, Morgan Stanley continues to monitor generative AI’s impact across sectors ripe for disruption, including:

• healthcare
• education
• food production
• manufacturing
• transportation and more.

The world is racing to meet ambitious sustainability goals outlined in the 2015 Paris Climate Accords, as well as various national and company-level targets. Easing dependence on fossil fuels will require vast amounts of capital and innovation, and key to that will be massive infrastructure upgrades and overhauls of carbon-intensive industries.

The transition will be a boon for some industries and a burden for others, with areas for investors to consider along the way. For instance:

• rewiring the supply chain for battery production to meet demand for electric vehicles is expected to require $7 trillion in private and public investments in the U.S. by 2040.
• similarly, the global aviation industry’s ambitions for decarbonization will be long and expensive but could result in billions of dollars of investment opportunity, bringing potential benefit to refiners and chemical companies.
• and with the increasing likelihood that carbon emissions will outpace government targets, investors may focus on climate adaptation and resilience. Morgan Stanley Research expects the voluntary market for carbon offsets to grow from $2 billion in 2020 to around $250 billion by 2050 as more companies and countries seek to meet climate goals as other methods to decarbonize come online.

The transition to a multipolar world dropped off this year’s list, but that doesn’t mean it isn’t important. When we identify long-term market themes, we expect those trends to persist for years. The multipolar world and the rewiring of global commerce will continue to reshape business models and geopolitical relations for decades.

The source of this article, Three Investing Trends for 2024 and Beyond, was originally published on January 17, 2024.