Brains Economic Assessments

Published Oct 11, 2020 4 min read
Matthew Kovach
PhD – Brains Chief Economist

Brains Economic Assessments

Although the current U.S. economic expansion is one of the longest in U.S. history, Brains has concerns that the U.S. economy is overheating, particularly given the potential adverse effects from the spread of the coronavirus, large tax cuts, increasing corporate and consumer debt, and the risk of a trade war(s). Most fund managers surveyed by Bank of America think the next recession could strike in early 2020. As a result of our research and the information presented in our Library, our Expert Portfolio is moving from equity funds more into safe instruments like CDs and bonds in the short term to safeguard for a potential recession, and will invest in equity funds again at lower prices once markets have corrected.

Medical:

Over the last few decades, the medical market has seen significant growth year over year. The industry has seen innovative solutions in gene sequencing and strategic collaboration between pharmaceutical companies. Since the start of the Human Genome Project in 1990, genomic companies have had access to vast amounts of gene sequencing information allowing consumers to trace their ancestry, screen DNA for potential genetic diseases, and preemptively test for adverse drug reactions. Success in the pharmaceutical field has been driven in particular by a growing elderly population. However, given the high costs of healthcare insurance and medicines and changing public opinion regarding government regulations, Brains is apprehensive regarding the long-term profitability of the healthcare market.

Agriculture: 

According to the World Bank, 65% of poor working adults around the globe make a living through agriculture. Agriculture also accounts for one-third of global GDP. As a result, growth in the agricultural sector is two to four times more effective in raising incomes among poorer populations than compared to other sectors. Technological improvements in farming equipment and techniques have played a major role in boosting agricultural growth. As the world population grows, the demand for food continues to increase. However, the corresponding increase in farmland may have negative effects. Agriculture accounts for 70% of water use worldwide. Further, most farming is done in developing countries, which may not have the infrastructure to regulate water pollution from modern agricultural products. This, combined with the risks posed by global climate change, increases global food supply risk.

Environment:

With pollution at an all time high, climate and environmental changes pose a serious threat to numerous industries and to humankind as a whole. For instance, rising water levels threaten shoreline populations and farms. In response, the market has seen an uptick in companies dedicated to environmental remediation. The global environmental remediation market was estimated to be 85.5 billion in 2017 and is expected to reach 152 billion by 2025, with annual growth projected to be 7.5% from 2018 to 2025. These companies are dedicated to ocean cleanups, soil pollutant removal, air filtration technology, and reforestation.

Population:

As global health standards improve, global life expectancy is increasing and infant mortality rates are dropping. This leads to significant population increases, with the most rapid population growth occurring in African countries. Nigeria is leading this growth and is estimated to increase by 527 million people by 2100. With this population growth comes increased demand and investment opportunities in infrastructure, natural resources, and education. Overall, many African nations have recently shown higher rates of stability and peace, coupled with fewer famines and natural disasters. There will be many new opportunities in these, and other, emerging markets.

Security:

With all the world’s major superpowers stockpiling weapons like never before, it sometimes feels like the Cold War never ended. Global military spending has hit its highest since the Cold War, after a slight dip in the 90s and early 2000s. One key difference is the inclusion of cyber security. Major military contractors have invested heavily in developing cyber security. Some estimates say global cyber security spending will reach 16 billion by 2023. Others, however, put that figure much higher as growth rates are expected to accelerate beginning in 2020-2021.

Energy:

The world’s reliance on fossil fuels has only recently begun to decline. Because of the serious threat posed by climate change, companies are racing to develop infrastructure for renewable and clean energy. Currently, about 80% of U.S. energy production comes from fossil fuels, 9% from nuclear generation, and 12% from renewable sources — wind, hydro-electric, and solar. According to the Energy Information Administration, renewable energy and natural gas production is expected to double by 2050. There is also a significant chance that new regulations regarding carbon dioxide and other greenhouse gas emissions will create a serious shake-up in the energy sector. Such legislation would likely cause the market to swing in favor of firms investing in alternative energy.

Technology:

The technology sector has seen tremendous growth over the last few decades. The demand for information technology has boomed since the turn of the century, with social media and E-commerce giants changing the way we interact and shop. Further, the rapid increase in consumer data and data analytics techniques has been utilized to generate massive ad revenues and increase sales. Innovation in smartphone technology, such as 5G, creates great investment opportunities. However, there are deep concerns regarding the misuse of information technology, leading to new privacy regulation in the European Union. Scandals, such as the one faced by Facebook and Cambridge Analytica, have further harmed the public image of these large social media giants. Further, many social media companies are currently in a precarious situation when it comes to how to regulate “fake news” and detect bots spreading (mis)information.