Technological development will transform the global marketplace over the next decade, with the oil and gas sector set to be the most negatively affected, according to Neptune Investment Management's chief investment officer and economist James Dowey.
Speaking at a press event, Dowey argued that the pace of technological change is likely to speed up over the next decade, with the development and adoption of new technology likely to drive returns in financial markets far more than traditional macro-economic factors.
'Over the next 10 years macro-economic issues such as the growth of China are going to be far less important. Rather, technological innovation and change is going to drive markets, and many established businesses will have their current models ripped apart,' says Dowey.
Pointing to the pace of technological change since the 1970s, Neptune's newly appointed CIO says that markets continue to underestimate the transformative power of technology despite the exponential growth of firms such as Google over the past five to 10 years.
In particular, he argues that the oil and gas industry could be entirely wiped out by 2025, with consumers and industry far more likely to be generating their own solar energy in a decade.
'The potential disruption to the energy sector is the most profound. I am not at all clear that we will still be digging oil out of the ground in 10 years' time. Household energy consumption will be radically different, with most generating their own solar energy at home,' says Dowey.
Pointing to the recent halving of the oil price, he adds there is a growing recognition that it may not be possible to even use the fossil fuels that have already been extracted, which is prompting a rush to the pumps in many oil-rich nations like Saudi Arabia.
CAPITALISE ON THE TECHNOLOGY TREND
The economist predicts that the automotive sector is also likely to wane, with demand for hybrid and electronic cars having grown apace over the past few years.
'Ironically, the auto sector is also likely to go the way of the horse and cart over the next decade. Again, this is tied to the demise of fossil fuels as well as growth in electronic car technology, where companies like Toyota and Tesla are leading the way,' Dowey says.
He recommends that investors looking to capitalise on the technology trend focus on companies involved in developing new technology as well as those actively adopting technology to transform their business models.
He suggests that established names like Google and Amazon are likely to continue to see strong growth due to ever-expanding economies of scale, while sectors unaffected by technology - such as food and beverages - are likely to be the most defensive.
'We are currently at the close of a 10-year chapter where macro-economic factors have driven returns in financial markets. Over the next decade technology is going to drive returns, and investors would do well to get off the sidelines,' he says.