S Ten-Year History Of Global Investment By Market Category

As one who is a big proponent for looking at trends, I thought I would show my followers how the market value of different business sectors has changed over the last ten years. The view you get by looking at trends is much, much better than any singular, one-point perspective has to offer. And the longer the trend view the better. A ten-year trend view offers a better perspective than a five-year trend view which offers a better perspective than a one-year trend view—especially from a policy and a decision standpoint perspective. 

In fact, one of my best articles for TalkMarkets, One Simple Graph That Every Investor Needs to Understand, looked at “inflation” over a period of approximately one-hundred years. That article offered a better perspective of that key economic variable, tying sub-divided period trends to historical facts, that I believe enlightened even the slow thinkers at the Federal Reserve. That article at least helps explain what I believe is now the current Federal Reserve policy regarding inflation and interest rate policy.

Enough said about the usefulness of looking at trends. Let’s go to the videotape and look at how the global portfolio of market investment has changed during the last decade. The following graph shows the “relative percent” of the global portfolio that ten different business sectors garnered each year over the past decade. The data comes from the yearly list of Forbes Global 2000 companies. The ten business sectors account for the total global market value, which was $36.9 Trillion in 2011 and $54.3 Trillion in 2020. 

Okay, Jim—so what are you trying to tell me with this trend perspective?

Let me start out with the obvious or what I consider the most important takeaways from the above graph, then work myself down.

  1. Financials reflect the largest of the ten business sectors. God only knows why this is the case, other than the fact that many powerful people think the money changers deserve to be paid extraordinary fees for serving a rather mundane accounting function in the business world. The ten-year trend in Financials seems rather steady with the exception of 2020. This last point in the Financial trend may be an aberration, but hopefully, it reflects a sign of wiser global policy setting with this sector declining in the somewhat near future.
  2. Information Technology has gained a larger proportion of the global market portfolio almost every year over the past decade. By far, Information Technology has grown at the fastest rate in global investment and where or when this increasing trend will stop is hard to guess. Only two other sectors, Discretionary Spending and Health Care show somewhat similar upward trending like that of Information Technology.
  3. The fact that Discretionary Spending (e.g., automobiles, apparels, appliances, hotels, restaurants, discount stores, furniture, home improvement, casinos) is increasing means people seem to be purchasing more things than just the necessities on a proportional basis. This tells me that the global economy has been generally improving over the last ten years.
  4. Health care seems to be gaining more influence over the global economy. Some of this makes sense especially considering the current pandemic (but much of the increase happened prior to the pandemic). Much of the Health Care increase can be attributed to the extraordinary cost of Health Care in the United States, which accounts for approximately 60% of the global market value in the global Health Care category. My own belief is that this category will actually level out or drop once the United States gets better control of its health care system.
  5. Energy, Materials, Telecom, and Utilities all seem to be drawing a smaller proportion of the global market portfolio. Much of this I believe could probably be explained through supply and demand curves and/or lower unit production costs and efficiency improvements, but I will leave that for others to think about. The significant increase in Information Technology versus these categories also plays a factor in these declining areas from a proportional standpoint.
  6. Staples are stable (seems somewhat fitting) in terms of its proportion of the global market portfolio. Staples in this case reflect businesses involved in food processing and retail, beverage, drug retail, household personal care, and tobacco.

Will the above trends continue into the next decade? I will leave that for my followers and the policymakers to decide on their own, but my advice is to take these trends to heart. They offer you the best perspective on how investments have been moving and it is not smart to ignore that truth.

I should also point out that trends can be examined in even greater detail for each of the above ten business categories, but I will leave that for the more curious investor to do on his or her own. 

My own investment strategy is that of an indexer and the safest bet I believe is to either index on the United States or the Global 2000 itself. The average rate of return for the Global 2000 over the past ten years has been 6.07% with a standard deviation of the only 0.55%.over that ten-year period  And based upon that standard deviation, I don’t think one should expect the Global 2000 rate to change much from that 6.07% rate (plus or minus 1.00%) going forward year by year. As a hedge against inflation, I would say an investment in the Global 2000 is an about as safe and rewarding investment as one can make. 

Global market trends can be viewed from many different perspectives. For my next TalkMarkets article I intend to provide my followers with the perspective of the ten-year rate of return of the Forbes Global 2000 by country association (e.g., United States, Europe, Asia Pacific, China, Middle East). Stay tuned.

Disclosure: No positions.

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Barry Hochhauser 1 year ago Member's comment

It sounds like your next article will be quite interesting as well.