Modern Investing: New Realities Shift Markets and Minds

We all know that investing is different today when compared with earlier decades, but how exactly?

That’s a question Bank of America attempted to answer recently, with its list of “huge changes for investing in the 2020s.”

Some of us remember the mindset of investors as the decade approached. Optimism ruled markets; trends and data were bearers of good news. More than one industry observer predicted a new “Roaring Twenties” was about to dawn.

A microscopic new player changed all of that. By some measures, COVID-19 has transformed almost everything, in every corner of the globe. One of the biggest measurable changes is what has happened to the debt borne by consumers and governments alike. With economic activity at a standstill, political leaders and central bankers flooded their nations with cash. In the U.S., trillions were added to the national debt over a period of months. Most significantly, the new spending accelerated on autopilot. Many new programs became a permanent part of the federal budget, presaging exponential debt growth for as far as the eye can see.

Topping Bank of America’s list of our decade’s new investment realities is the descent from peace into war. War brings inflation, instability in energy supplies, restricted capital flows, retreat from globalization and ultimately higher trade barriers, the bank observes.

A new player is also taking the field, BofA notes. Artificial intelligence promises to reshape the workforce and reorder the financial landscape. The rise of AI is part of a broader tech revolution that saw the Wild West ethos of the 90s Internet give way to the dominance of a few huge technology corporations. The fearless innovators we all admired at the dawn of the digital age are largely gone, as is Google’s original tagline: “Don’t be evil.” Now advances in computers and digital technologies move forward with a momentum all their own, to a place we can only guess — or, in the case of AI, reasonably fear.

Back in 2019, Bank of America saw a Cold War-type rivalry driving innovation in this sector: “We believe the current trade war will transition towards a tech war in the 2020s, which will see a new ‘arms race’ between the U.S. and China to reach national superiority in technology over the long term vis-a-vis Quantum Computing, Big Data, 5G, Artificial Intelligence, Electric Vehicles, Robotics, and Cybersecurity, etc.”

In that same pre-pandemic report, the bank also predicted space ventures and something it termed “moral capitalism” would reshape the investment environment in the new decade.

Clearly, Bank of America’s quatrains have not always been on the mark. The rise of hedge funds is another prime example. In 2019 Bank of America saw a flight to cash and commodities in the new decade, and thought utilities and global beverage companies provided winning investment strategies.

From the vantage point of 2023, we can see that some of the most successful high-end investors have benefited from the strategic insights of leading hedge funds this decade. The best of these funds are nimble enough to identify trends and seize emerging opportunities. Toronto-based Anson Funds is an often-cited example, having added value to portfolios with a clear-eyed view of the electric vehicle industry that allowed clients’ fortunes to rise as some EV manufacturers’ fortunes fell. This flexibility has proven to be an effective and strategic way to manage risk, reduce volatility and create wealth.

Anson Funds is agile because its pool of top-tier talent is deep, and limited in number. Largely governed by the proven investment instincts of one man, it moves quickly, and tends to have a ground-up understanding of the companies and sectors in which it invests, in part because its team prioritizes networking across industries and disciplines. It lacks the bureaucratic layers and consensus mindset of financial giants such as BofA.