What are the most important trends in the last decade? Which ones will continue and which ones will turn? I have taken 7 major trends –  gold, US stocks, emerging markets, debt, interest rates, housing and tech.

1. Spectacular rise of Gold.

From early 80s till the end of 90s, gold was a laggard. As inflation fears receded (thanks to China’s low cost exports) and growth fears subdued (due to “unreal” 90s – when growth skyrocketed due to open markets worldwide), gold’s role was really questioned. Most mainstream commentators thought gold bulls were dinosaurs and gold investing was anachronistic.

However, gold would prove its detractors wrong.

As the decade swung between two recessions (dot-com crash followed by jobless recovery in the US & Great financial crash of 2007-09) and harsh inflation in mid noughties, investors flocked to gold. While investors of real estate, bonds and stocks saw mixed fortunes, gold didn’t fail. In general gold goes up in uncertainties as investors are more comfortable with gold than anything else. the impacts of the financial crash might continue into this decade and inflation might oscillate when the monetary expansion is cut off. Also, as more of Indians and Chinese get wealthy they might buy more of gold ornaments and investment bars. So, gold trend has greater chances of continuing the current bullish trend.

2. Worst decade for US stocks since great depression – market going nowhere

Here is the performance of Dow (top 30 stocks in the US). For most of the decade the index went around the magic number of 10000 and except for 2006-07, investors have nothing much to cheer about. It looks likely that the market might continue this dance around 10000 for a 1-2 years before breaking out. Federal Reserve is most likely to start increasing its interest rates from this year and it remains to be seen how the market is going to handle that. The recession shows signs of ending with bottoming out job loss numbers, but a lot of recovery is already priced into the stocks. It is time to show greater attention to building a balanced portfolio – with more weight for bonds & emerging market stocks, that people used to in the past 20 years.

3. Rise of emerging markets

While developed country markets failed, emerging markets had a great run. Notwithstanding the cash post-September 2008, emerging markets gave 400% returns in the past 7 years. As India and China continue their economic growth, the stock markets should see further growth. Though there is worry about overheating –particularly in Chinese markets – in the long run, India & China markets are a far better bet than developed country markets.

4. Change at the top of the helm in Tech

After 2 decades of breakneck growth Microsoft stock had a poor decade. It followed the overall tech index and for most of the decade the index & MSFT when nowhere. On the other hand, Google (which was in their garage at the start of the decade and Apple which was close to dying, were the top tech companies of the decade. Microsoft is making valiant attempts to break Google’s hegemony in search and iPhone supremacy in smartphones, but so far it is on the losing end. Barring a major new product release, the trend would continue and Google/Apple could overtake Microsoft in marketcap in 2-3 years.

5. Historically low interest rates

In the US the interest rates hovered at or below 2% of most of this decade except for the 2004-07 period as the US federal reserve fought hard against the 2 recessions. There was a brutal side-effect to this low-interest policy – people borrowed a lot to buy homes and stocks and bonds in the 2002-07 period. Even now there is trend of borrowing  in dollar and investing in promising markets abroad (called the carry trade). This low interest trend cannot continue and within this year interest rates should start climbing again. By the middle of the decade, interest rates could be 5+% as the effects of stimulus plan cause a drag on the economy and reduction in credit.

6. Skyrocketing US debt

While US debt has been growing ever since the 1980s, the growth rate substantially increased since 2000. US debt is at highest among non-wartime periods. This will have significant impact on future interest rates and spending. This trend might continue, though there might be a push to slow the rate this decade.

7. Most spectacular housing market increase in US history

Since late 90s, US housing markets was on a tear. Part fear (of stock markets), part financial innovation (new ways of repaying loans came) and part interest rate drop, Americans flocked to the housing markets. The bubble started to break in 2006 and after effects are still showing. the market is still close to the inflated prices at the top of the decade, but is likely to come closer to the historical levels. The graph is adjusted for inflation. This decade is unlikely to repeat the performance of early noughties and growth could be low throughout the decade.