2017: Three reasons to be optimistic
2016 has been a tumultuous year! And certainly not a great year to be a pollster. Reading the headlines one would think the world is in dire shape with a range of problems piling up for 2017.
However, let’s stand back and take a longer view. There are many reasons to be optimistic about the future. Below are just a handful, all of which will be good for stock markets in the long term.
World literacy rates are improving. According to Unesco, the literacy rate for adults is 84% and this has increased dramatically over the past decades. In 1950 the figure was 56% and in 1970 it had risen to 76%.
Why does literacy matter? For an individual if you are literate the chances of escaping poverty are greatly improved. There is a link between literacy and earnings. And with greater earnings you have more to spend and invest. For a nation it represents investment in what economists call ‘human capital’ and is essential for long-term growth.
One study that investigated the relationship between education, literacy and economic growth found that investment in human capital is three times more important to economic growth than investment in physical capital. Thus any government that wants to increase its growth rate should invest in literacy.
Equally the number of hungry people in the world is decreasing. According to the UN Hunger Report, in 2015 the number of hungry people was a staggering 795 million, but that is 216 million less than in the early 1990s.
Needless to say that a population free from hunger will be more productive. Quicker economic growth will follow once a population’s basic needs are met. The next target will be to eliminate all hunger within many people’s lifetime.
Related to the above is that people are living longer. During the 20th century life expectancy rose dramatically owing to better nutrition, public health and medicine. In the UK life expectancy increased by 10 years in the first 50 years of the NHS. In 1948 40% of people died before reaching pensionable age. Infant mortality improvements also help. If a child reaches their first birthday, their chances of living longer increase exponentially.
According to AgeUK, the life expectancy of a male in the UK is 78.8 years while that of a woman is 82.8 years, and with each year this tends to increase.
Okay, we know about the burdens of an ageing population on pensions and the health service, but this also represents a growing market for many companies. The ‘grey pound’ is important and will increase. It is the pensioners that have money to spend, think about cruises!
These are just three good reasons to be optimistic about 2017 and the years beyond. If the world’s population is more healthy, better educated and living longer then the world should continue to become more wealthy. That presents a myriad of investment opportunities and I find that quite exciting.