The global economy is moving into a new era of growth driven by the artificial intelligence boom and decarbonization.
Forty years ago, the world economy entered its current supercycle, when interest rates and inflation peaked, paving the way for a period of enormous growth known as the “long boom.”
“I think we're clearly moving into a different supercycle, in which these “Some of the factors are no longer as reliable.”
Oppenheimer explained that the current economic supercycle, or period of rapid expansion, began in the 1980s, when borrowing costs peaked and was followed by about 35 years of low interest rates. Meanwhile, the end of the Cold War eliminated many geopolitical risks and deregulated several industries, from airlines to banks. Finally, there was globalization, which rewired international trade and finance.
As the global economy heads toward a new wave of growth, Oppenheimer said the factors supporting a new supercycle will not come from the same place. Interest rates are not falling aggressively. Globalization has received much criticism. Geopolitical risks are rising.
“While these factors should reduce the pace of returns across financial assets compared to the past decade or so, there are several other important factors that could be very positive,” he said. . “The combination of AI and its impact on productivity” and decarbonization are also needed. ”
The AI boom helped technology companies dominate the market last year, with companies like Nvidia and Meta seeing their stock prices rise by triple digits. Despite the sector's stumbling start to 2024, Wall Street is optimistic about where AI will take the market, especially as the technology begins to permeate every sector of the economy.
Oppenheimer also notes that tech companies in the “epicenter” of the boom are relatively undervalued compared to the big tech companies in the Nifty-Fifty bubble of the early 1970s and Japan's tech bubble of the late 1980s. He also said that it looks like.
“They are already much more profitable,” he added. “So I think this is a story that could continue for some time to come and have a very big impact.”
The decarbonization story is the other side of the upcoming global growth cycle. Oppenheimer says technological developments will lead us to a point where the world's physical demands will change. As the climate warms, economies are being forced to rebuild and modernize, and this change typically ushered in a phase of economic growth.
