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Brace yourself: 4 tectonic shifts will rock markets in 2014


Whether it’s war or sports or business you’re talking about, the best leaders always want to be armed with the best weapons. For investor Doug Cote, the chief U.S. market strategist at ING Investment Management, that means getting ready to do battle against four major themes next year. Trends that are so huge and so dominant that he’s singled them out as ‘’tectonic trades.”

1) Energy

“I call energy a competitive weapon,” Cote says in the attached video. “In the United States we have an 80% cost advantage on natural gas.”

As a result, he says for the first time in generations, manufacturers from all over the world are considering making a move to our shores to build their next plants. This so-called “on-shoring” trend is already visible in manufacturing data which is bubbling up from 20-year lows.  

Cote is so confident in the coming wave of energy-inspired investment that he predicts our long-standing trade deficit will actually become a trade surplus within two years.

“And we will double economic growth from two percent to four percent just on the trade deficit” he says. “That’s how important energy is.”

2) Technology

It’s not that there’s going to be some great new technological innovation or contraption that changes everything, but Cote lists the ongoing technological revolution as his second huge theme for 2014.

“Technology impacts every sector in the economy,” he says, noting that our ability to store, retrieve and manipulate data is “changing they way businesses conduct everything.”

“It helps their top and bottom line and just expands the opportunities,” he says, pointing out that we’re not only seeing an influx of so-called smart factories, where manufacturing investment has a pronounced multiplier effect on every dollar spent. 

3) Global Trade

“Since the dawn of civilization, if you create free flowing trade, it has helped man get out of his problems,” Cotes says. “Global trade is the most dynamic” he says, stating that it will get us out of any type of recession.

In part, he links global trade growth with his aforementioned energy prediction and cites the yet-to-be appreciated ripple effect that will roil the world as China becomes the world’s top energy importer.

4) Frontier Markets

China is already the world’s second largest economy and this fast-growing, emerging market is set to take the top spot with the next two or three years. What excites Cote even more than that is what he refers to as the “newly emerging, emerging markets” often called frontier markets.

In particular, he favors what he calls the “PIVOTS countries”, specifically Peru, Indonesia, Vietnam, Oman, Turkey and Sub-Saharan Africa, and predicts that, longer term, five of the world’s ten fastest growing economies will be in Africa.

“Global economic growth has doubled from 2003 to 2013,” Cote says. “We went from a $37 trillion global economy to a $73 trillion economy in large part due to these emerging markets and new frontier markets.”

Collectively, he calls it the global consumer trend and expects this bottom-up burst of consumption to be driven by places you’ve likely never even thought about investing in.

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