Investors’ key concerns may be described as the "Three Ds":
* Debt. The U.S., the European Union and Japan account for about 60% of the world’s economic output. All of these mature economies have added huge amounts of debts in recent years, both government and private. Paying off this debt will hamper future growth.
* Deficits. The major economies mentioned above keep running budget shortfalls. These shortfalls add to accumulated debt.
* Demographics. The developed countries’ populations
will not grow over the next decade while their combined workforces will shrink because of aging. So a smaller population will reduce economic output while retirement and health care benefits for the elderly will expand.
If those are the trends, how can you adapt your portfolio? One tactic is to emphasize technology stocks and funds holding those stocks. The biotech industry may produce tremendous life-saving and cost-saving breakthroughs; technological innovation will transform virtually every industry, from energy and agriculture to entertainment and financial services.
You also should have substantial exposure to emerging markets funds with investments in China and India. Economic
output per person in China and India is only $8,000 and $4,000, respectively, vs. $48,000 in the United States. As emerging markets close that gap, enormous opportunities for investors also will emerge.