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Where Are the Future Global Growth Opportunities?

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A lack of international exposure could mean missing out on some major worldwide investment themes. One of the most significant themes is the rise of the global middle class. 

By the year 2030, 93% of the global middle class will be from emerging markets, and Asian consumers are predicted to account for two-thirds of all middle-class spending. 

Global providers of household goods, cars and many other products may benefit from this middle-class megatrend.

As the middle class grows and incomes increase, emerging-market citizens are likely to save more, accumulate more wealth and demand more financial services. 

A growing middle class may bring greater urbanization and less active lifestyles. There’s also a trend for consumers to move from lower-calorie diets high in grains and vegetables to higher-calorie diets containing more meat, dairy and sugar. And all of that could lead to health problems and greater demand for healthcare services for the middle class. 

Another theme is the global adoption of mobile technology. The traditional notion that consumers in developed countries are quick adopters of new technologies, while the emerging world is slow to catch up—that may no longer hold. 

For example, the adoption pattern of mobile phones in many emerging-market countries is fairly similar to what happens in America. And the percentage of adults who own a mobile phone in China and Russia—two emerging-market countries—is even higher than that of the United States. The ability to deliver goods and services and receive payment through the platform of the mobile phone is a potential revolution in the ability to access a new and rapidly growing global consumer base.

Broad themes like these could provide new growth opportunities for companies around the globe. A global perspective means approaching investing differently. Instead of deciding what country to invest in, the focus is now on investing in great companies from many countries. Of course you should keep in mind that trends can change, and the future may evolve in unexpected ways, so investing in opportunities created by these trends still carries risks. 

Your international allocation should be 25 to 50% of your total stock market investments to benefit from the global opportunity and perspective. 

While this may seem high, the international weighting necessary for truly global exposure is likely to increase over time as global trends become even more entrenched.

Important Disclosures

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance.

International investments involve additional risks, which include differences in financial accounting standards, currency fluctuations, geopolitical risk, foreign taxes and regulations, and the potential for illiquid markets. Investing in emerging markets may accentuate these risks.

©2015 Charles Schwab & Co., Inc. All rights reserved. Member SIPC.


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