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Investing Megatrends: Mass Affluence

Highlights

  • The move toward “Mass Affluence” is one of the world’s durable investment themes
  • Demand from the billions moving into middle class is affecting several key industries
  • Global brands headquartered in developed markets may be big beneficiaries

At this moment, approximately 3 billion people – close to 40% of the world’s population – are moving to something approximating a middle-class standard of living.1 This move toward “Mass Affluence” is one of the world’s truly important and durable investment themes.

This megatrend is fueled, in part, by a one-time demographic bulge which is substantially reshaping the global economy. Of course, the growth of the middle class has happened before in places such as Western Europe and the United States. But those movements took centuries. Today’s move out of poverty is happening over a period of a few decades.

The move toward Mass Affluence is relatively borderless. Surely there are many fast growing firms based in the emerging markets that will take advantage of the megratrend. But some of the major beneficiaries of the growth are the well-regarded global brands headquartered in developed countries. This is true in an array of industries, including autos, luxury goods and beverages.

Mass Affluence is not really about becoming rich. It’s about a progression to increasing discretionary income. Demand from those 3 billion people is driving the marginal demand of hotel rooms, mobile phones, and a multitude of other goods and services. This is not a short-tailed event either, and one that likely won’t be stopped by any ordinary economic cycles.

A globalized portfolio, a set of equities that provides exposure to the companies that cater to the needs of the new emerging market consumer class, may be an attractive opportunity for patient, long-term investors. While global equities may have their ups and downs, the Mass Affluence megatrend goes beyond borders and has structural, not just cyclical, growth potential. In fact, periods of controversy may provide a good entry point for this durable, decades-long theme.

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  1. The Brookings Institution. “The New Global Middle Class: A Cross-Over from West to East” (March 2010).

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