Point of View - Global Investment Solutions from Northern Trust

Voices: Stephen N. Potter

A review of current activity in global financial markets, with an emphasis on U.S. markets.

Today, and over the foreseeable future, a series of events — call them global megatrends — will have a profound impact on the world economy. Each issue of Point of View will share insight into these trends and how the institutional investment community is preparing to address them.

THE DEMAND FOR COMMODITIES

Commodities have enjoyed a strong bull market during the past several years, and many of the underlying factors driving demand — and higher prices — remain in place. For example, the world’s population continues to grow, especially in urban areas, and is expected to hit 8.2 billion by the year 2030. In addition, the commodities appetite of developing countries should continue as they assume increasingly important roles on the global economic stage. These countries, as well as developed markets, must implement or improve their infrastructure systems to support their economic engines.

Commodity Prices Have Trended Higher
Increased demand and growing investor interest have pushed commodity prices to new heights, particularly in recent years. Prices fell back slightly during the summer of 2008 due to several factors, including investors recognizing profits, but the overall demand projections remain strong.

Source: International Monetary Fund

The Rise of Urban Areas
As the world’s population grows, it is expected to become more urban. Current estimates show that by 2030, about 4.91 billion people, or roughly 60% of the world population, will live in urban areas.

Source: United Nations, Department of Economic and Social Affairs, Population Division

The Need for Infrastructure
Worldwide infrastructure expenditures are expected to top US$40 trillion over the next 25 years as developed markets upgrade systems and emerging markets assume a larger role in the global economy.

Source: Booz Allen Hamilton, Global Infrastructure Partners, World Energy Outlook, Organisation for Economic Co-operation and Development, Boeing, Drewery Shipping Consultants and U.S. Department of Transportation

Increased Demand from Emerging Markets
Demand for commodities from emerging and transitional economies should remain strong as countries increase both productivity and consumption.

Source: World Development Indicators 2008, The World Bank

Related Links

Greater Acceptance of “Alternative” Investments
Read the Global Megatrends report from the October 2007 issue of Point of View.

International Monetary Fund
Publishes indices of commodity prices.

The World Bank
Economic reports on the world’s developed and emerging markets.

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