Ok, for arguments sake, lets assume interest rates are not going to be rising anytime soon (ie. decades). Government and personal debt is just too high to allow a true normalization of rates. The gas pedal has been held down for too long, and demographics are adding to the mess in most of the developed world. In essence, we are all Japan now......
http://business.financialpost.com/personal-finance/family-finance/why-interest-rates-will-remain-low-and-what-that-means-for-your-retirement-security
I agree 100%;
Too often we hear the words ‘this time it’s different’ to justify a wild bubble or something. But this time it is different.
-the world governments (almost all of them) have assumed an enormous amount of debt – unprecedented. This limits the ability to raise rates, as they can’t afford to roll over the old debt at higher rates.
-Currency war; ‘race to the bottom’ as the major currencies attempt to undercut each other. This has happened before, but not often. The results are disruptive.
-Aging global population and slowing population growth – unprecedented. There are no more ‘growth engines’, no more untapped Chinas to come on-line.
What the results will be is anyone’s guess. However I suspect what will happen is:
-Low, Zero, or Negative interest rates as Central banks continue to attempt to drive growth despite deflationary pressures
-Some savers will suffer (i.e. Japan), mostly in import-dependant countries, if their currency is successfully inflated relative to the rest of the world
-Deflationary pressures: food, energy gets cheaper as commodity demand slows or declines (seen a lot of this already)
-‘Stagnant’ economy. Not necessarily a bad thing: it can still be strong, profitable, and have good investment choices. But we are so hard-wired to drive for ‘growth’ that anything other than ‘growth’ is ‘bad’. We will eventually discover (as Europe, Japan, have already, they just don’t admit it) that economic activity will ‘right-size’ itself.
How to invest/profit from this:
-No idea. Medical care industry ‘should’ do very well due to demand, but it’s so expensive already and so entrenched in politics it’s a complex analysis.
-the ‘rentier’ business should be fine. REITs are my preferred way to get property exposure.
Personally I’m more or less ‘staying the course’ of primarily index investing combined with some REIT and other dividend investments. I suspect we’ll eventually see rising dividends (more in line with historical trends) as companies have to do something with their money. There has been minimal corporate investment for a long time, the profit has been going largely into stock buybacks which is helping lift equity prices. This is way above the trendline and will not last forever.
That’s all my crystal ball is telling me.
TL/DR: ask your dog.