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10 Global Insights into a Transforming World

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10 Global Insights into a Transforming World from 2019

global trends

10 Global Insights into a Transforming World from 2019

Every day, global trends are reshaping society and the business landscape.

Today’s infographic from McKinsey Global Institute (MGI) presents a snapshot of 10 insights into how the world is changing, based on its research work from 2019.

How did we get here, and where are we going?

A Connected World in Flux

Globalization is making the world “shrink” every day, as humans and trade become increasingly connected. However, there are signs that point to a new phase of globalization that is leading to different outcomes than prior years.

1. Globalization in Transition

Global exports are fundamentally shifting. Although manufactured goods are traded at higher volumes, certain services have grown up to three times faster.

The compound annual growth rate (CAGR, 2007-2017) for different sectors are as follows:

SectorsGlobal CAGR (% of GDP)
Telecom and IT services7.8%
Business services5.3%
IP charges services5.2%
Total services3.9%
Travel services3.7%
Financial and insurance services3.2%
Total goods2.4%
Transport services1.7%

This has a profound impact on the mix of industries and countries involved in this shift away from goods and towards services. Asia is coming of age in this phase of the global economy.

2. Asia’s Ascent

Trade with and within Asia is rising, and shows no signs of slowing down. The region’s economic might is growing rapidly, and with higher disposable incomes, consumption is growing too.

In China, there is a new dynamic at play.

3. China’s Changing Relationships

Compared to other developed nations, China’s economy is relatively closed. The country is re-balancing its focus towards domestic consumption and relying less on other countries for trade, technology, and capital.

At the same time, the rest of the world is increasingly exposed and tied to China for the same things—and such unequal engagement has a ripple effect on everything from financial markets to flows of technology and innovation.

Technology and the Future of Work

New technologies like artificial intelligence are sparking new opportunities, but they also raise questions about the future of work across geographies and gender.

4. Increasingly Digital India

As the costs of devices and data plummet, India’s digital adoption is surging—it closely competes with China for the highest digital population across everything from smartphone ownership to social media users.

As mass adoption of digital technologies continues, it is poised to add significant economic value to the Indian economy.

Digital sectorCurrent economic valueMaximum potential value (2025E)
Core digital services
e.g. IT business process management
$115B$250B
Newly digitizing sectors
e.g. Financial services
<$1B$170B

Companies worldwide are also integrating new technologies—changing the nature of work itself.

5. New Geography of Work

By 2030, talent and investment in the U.S. will be concentrated in a few regions—with 60% of job growth coming from just 25 hubs.

Potential Net Job Growth
These are just some examples of places which see double-digit potential net job growth by 2030. However, all regions will face unique challenges in the next decade.

6. Automation’s Effect on Gender at Work

Globally, women and men are at similar risk of losing their jobs to automation by 2030.

  • Women: 107 million FTEs
    Share of female employment, 2017: 20%
  • Men: 163 million FTEs
    Share of male employment, 2017: 21%

*FTE: full time equivalent. Based on midpoint automation scenario.

While everyone needs to adapt in the age of automation, women face more barriers. They spend up to 1.1 trillion hours on unpaid care work, nearly three times that of men (400 billion hours).

Women are also often in lower-paid roles or male-dominated professions. Additionally, many women have less access to digital technology, and limited flexibility to pursue education. These factors make it harder for women to “catch up” and bridge the gap left behind by automation.

Inequalities and Uncertainties

It’s clear that while technology generates opportunities, it also creates new social challenges. Low- and middle-income households face stagnating incomes, higher debt, and rising basic costs.

7. Declining Labor Share of Income

The U.S. labor share of income has been dropping for years—but ¾ of this decline has occurred since 2000.

Labor Share of Income
According to McKinsey Global Institute, boom-bust commodity cycles and rising depreciation are the main factors behind this trend, more so than commonly-cited automation or globalization.

Stagnating incomes mean less purchasing power, while the cost of basics are sharply rising.

8. Changing Consumption Costs

The global inequality gap has narrowed, but within developed economies, it has actually increased.

Technology and globalization have made many discretionary goods cheaper. However, basic costs such as education, housing, and healthcare have ballooned compared to the rate of inflation over the past decade.

Category Inflation
With wages stagnating, the higher costs for basics have eaten into disposable incomes in many mature economies.

A Changing Business World

Global trends drastically influence how companies compete with one another, transforming corporate dynamics worldwide.

9. Corporate Superstars

In just two decades, the distribution of economic profits has been growing increasingly wider. The top 10% of companies (>$1 billion in revenue) brings in an ever-larger share of total profits, while the losses of the bottom 10% share deepen.

  • Average profit per company, 1995-1997
    Top 10%: $0.85B
    Bottom 10%: -$1.02B
  • Average profit per company, 2014-2016
    Top 10%: $1.36B
    Bottom 10%: -$1.56B

*In 2016 dollars. Considers corporations with ≥$1 billion average sales (inflation-adjusted). Sample sizes: 2,450 companies (1996–1997) and 5,750 companies (2014–2016).

In essence, the bottom 10% destroy as much value as the top 10% create—and it has only intensified in 20 years.

10. Latin America’s Missing Middle

Latin America best exemplifies this corporate trend of companies “thriving” versus “surviving”.

Compared to similar economies, Latin American countries lack mid-size companies with over $50M in revenue. The Latin American average for firms per $1T GDP is 65 firms, while 100 firms is the benchmark average.

While Asia’s share of the largest firms is widely distributed across countries, Latin American enterprises are lagging behind.

What does the Future Hold?

CEOs and leaders will need to adapt to the new age of disruption—and quickly. To become a 21st century company, they must ask 10 crucial questions about how they operate in an increasingly complex world:

  1. What is our mission and purpose as a company?
  2. How far do we go beyond shareholder capitalism? How are we accountable to different stakeholders?
  3. Who benefits from our economic success? How?
  4. What is the time horizon for managing our economic success and impact?
  5. What is our responsibility to our workforce, especially given future-of-work implications?
  6. How do we leverage data and technology responsibly and ethically?
  7. What are our aspirations for inclusion and diversity?
  8. What is our responsibility for societal and sustainability issues involving our business, and beyond?
  9. What are our responsibilities regarding participants in our platforms, ecosystems, supply and value chains and their impact on society?
  10. How should we address the global and local (including national) imperatives and implications of how we compete, contribute and operate?

As the 10 insights suggest, global trends are profoundly altering the course of our future. Their impact varies greatly depending on demographics and region.

Everyone—business leaders, policy makers, and individuals worldwide—will need to adapt to the realities of a world in transformation.

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Energy

The Periodic Table of Commodity Returns (2021 Edition)

Which commodity had the best returns in 2020? From gold to oil, we show how commodity price performance stacks up over the last decade.

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The Periodic Table of Commodity Returns (2011-2020)

Being a commodity investor can feel like riding a roller coaster.

Take silver. Typically known for sharp, idiosyncratic price movements, it faced double-digit declines in the first half of the decade, falling over 35% in just 2013 alone. By contrast, it jumped over 47% in 2020. Similarly, oil, corn, and others witnessed either steep declines or rapid gains.

The above graphic from U.S. Global Investors traces 10 years of commodity price performance, highlighting 14 different commodities and their annual ranking over the years.

Commodity Price Performance, From Best to Worst

Which commodities were the top performers in 2020?

The aforementioned silver tripled its returns year-over-year, climbing 47.9% in 2020. In July, the metal actually experienced its strongest month since 1979.

RankCommodity
Return (2020)
Return (2019)
Return (2018)
1Silver47.9%15.2%-8.5%
2Copper26.0%3.4%-17.5%
3Palladium25.9%54.2%18.6%
4Gold25.1%18.3%-1.6%
5Corn24.8%3.4%6.9%
6Zinc19.7%-9.5%-24.5%
7Nickel18.7%31.6%-16.5%
8Gas16.0%-25.5%-0.4%
9Wheat14.6%11.0%17.9%
10Platinum10.9%21.5%-14.5%
11Aluminum10.8%-4.4%-17.4%
12Lead3.3%-4.7%-19.2%
13Coal-1.3%-18.0%-22.2%
14Oil-20.5%34.5%-24.8%

Along with silver, at least seven other commodities had stronger returns than the S&P 500 in 2020, which closed off the year with 16.3% gains. This included copper (26.0%), palladium (25.9%), gold (25.1%) and corn (24.8%).

Interestingly, copper prices moved in an unconventional pattern compared to gold in 2020. Often, investors rush to gold in uncertain economic climates, while sectors such as construction and manufacturing—which both rely heavily on copper—tend to decline. Instead, both copper and gold saw their prices rise in conjunction.

Nowadays, copper is also a vital material in electric vehicles (EVs), with recent demand for EVs also influencing the price of copper.

Silver Linings

As investors flocked to safety, silver’s price reached heights not seen since 2010.

The massive scale of monetary and fiscal stimulus led to inflationary fears, also boosting the price of silver. How does this compare to its returns over the last decade?

silver returns 2011-2020

In 2013, silver crashed over 35% as confidence grew in global markets. By contrast, in 2016, the Brexit referendum stirred uncertainty in global markets. Investors allocated money in silver, and prices shifted upwards.

As Gold as the Hills

Like silver, market uncertainty has historically boosted the price of gold.

What else contributed to gold’s rise?

  • U.S. debt continues to climb, pushing down confidence in the U.S. dollar
  • A weaker U.S. dollar makes gold cheaper for other countries to buy
  • Low interest rates kept the returns of other safe haven assets low, making gold more attractive by comparison

Here’s how the price of gold has changed in recent years.

gold returns 2011-2020

Gold faced its steepest recent declines in 2013, when the Federal Reserve bank discussed tapering down its quantitative easing program in light of economic recovery.

Hitting the Brakes On Oil

Oil suffered the worst commodity price performance in 2020, with -20.5% returns.

For the first time in history, oil prices went negative as demand plummeted. To limit its oversupply, oil producers shrunk investment, closed wells, and turned off valves. Unfortunately, many companies still faced bankruptcies. By November, 45 oil producers had proceeded with bankruptcy filings year-to-date.

This stood in stark contrast to 2019, when prices soared 34.5%.

oil returns 2011-2020

As is custom for oil, prices see-sawed over the decade. In 2016 and 2019, it witnessed gains of over 30%. However, like 2020, in 2014 it saw huge losses due to an oversupply of global petroleum.

In 2020, total production cuts hit 7.2 million barrels a day in December, equal to 7% of global demand, in response to COVID-19.

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Mining

Why Gold Mining Stocks Outperform Gold in Bull Markets

Gold mining stocks outpace gold returns in bull markets, but how? With higher gold prices, miners get ahead thanks to operating leverage.

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Gold Mining Stocks in Gold Bull Market

Why Gold Mining Stocks Outperform Gold in Bull Markets

Gold is highly revered for its great returns and resilience during economic downturns, but during gold bull markets there’s something that regularly provides even greater returns: the ownership of gold mining stocks.

Over the past 20 years, gold mining stocks have outperformed the price of gold bullion in bull markets, offering what can be seen as a leveraged play on gold’s price appreciation.

While gold miners offer more potential upside, they also have higher volatility and greater downside during dips, making market timing and strong hands all the more important.

This infographic comes to us from Sprott and compares the returns of gold stocks and gold bullion in bull markets. It also explains how gold stocks outperform thanks to profit expansion, and shows why there might be more upside for gold miners to come.

How Operating Leverage Benefits Gold Mining Companies

During the 2000-2011 gold bull market, the price of physical gold rose 550%. While you might think that number is hard to beat, over the same period of time gold mining equities (represented by the NYSE Arca Gold Miners Index) returned more than 690%.

In the current gold bull market which started in 2015, gold mining stocks are up more than 182%, more than doubling gold bullion’s 78% returns.

This outperformance in bull markets is largely due to how gold mining companies use their operating leverage to maximize profits, resulting in their share prices appreciating.

Breaking Down Gold Mining Costs and Profits

As a gold mining company mines and produces gold, the gold is sold on the market fairly quickly to avoid the risk of gold’s price depreciating.

When the price of gold rises, miners immediately start to see greater profits from selling their ounces on the market. While the costs to mine gold also rise in bull markets, they rise less and at a slower rate.

The result of this is profit expansion: when operationally efficient gold mining companies are able to capture larger profits, resulting in increased operating and free cash flow.

Breakdown of Barrick Gold’s Profit per Ounce of Gold

YearAll-in Sustaining Costs/oz (in USD)Realized Gold Price/oz (in USD)Profit/oz (in USD)
2015$831$1,157$326
2016$730$1,248$518
2017$750$1,258$508
2018$806$1,267$461
2019$894$1,396$502
2020$984$1,748$764

During the current gold bull run which started in 2015, Barrick Gold’s average realized price per troy ounce of gold increased by 50%, while their all-in sustaining costs per troy ounce only went up by 18%.

This has resulted in the company increasing their profit per ounce of gold sold by a staggering 134% over the past six years.

Making the Most of Golden Times

While higher profit margins during bull markets are great, it’s up to the individual company to ensure the extra cash is being used prudently to efficiently support their operations.

Bull markets don’t last forever, and gold miners must use these prosperous times to strengthen their balance sheets, reward shareholders, and reinvest into projects which will provide future value and returns.

Dividend-paying gold stocks increase dividends to reward loyal shareholders, with the average dividend increase of top gold mining stocks in a bull market often doubling.

Over the decades, companies have gotten better at making the most of bull markets in order to be well-guarded for when gold prices stop appreciating, and eventually start declining.

Why Gold Mining Stocks May Still Be Undervalued

Even if gold mining stocks have already seen impressive returns over the past five years, there are some technical indicators which point to them still being undervalued compared to other equities and gold bullion.

  • The top 10 gold mining companies have seen their earnings per share estimates almost triple in the past two years.
  • The top 20 S&P 500 companies have seen around a -15% decline in their earnings per share estimates.

Along with having better earnings per share compared to the top U.S. equities, gold mining stocks may also be undervalued compared to gold bullion.

The gold mining stocks to gold bullion ratio is at historically low levels after having dropped more than 60% following the 2008 financial crisis. While gold bullion is increasingly seen as a safe haven asset for investors, gold miners are still overlooked despite their strong technicals.

Gold and Gold Miners’ Role in the Future Economy

As money printing has been the Federal Reserve’s main answer to an increasingly volatile economic climate, gold and its producers are set to play a crucial role in helping investors preserve their wealth.

Gold has yet again outperformed just about every other asset class in 2020, and gold miners offer even greater returns for those willing to manage the additional risk they present.

Gold mining stocks are much more volatile compared to gold bullion, and have a variety of additional risks dependent on their company structure, jurisdiction of operations, and operational efficiency. But for investors who are looking for exceptional returns in gold bull markets, they can be an alluring option.

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