Chapter 1: What A Transforming World Means
What Is the Transforming World?
MR. INSANA: Hello, everyone and welcome. I'm Ron Insana. A resurgence in American innovation and high tech manufacturing, a slow yet steady shift into equity markets and away from bonds, rising levels of wealth in emerging economies. These shifts, while profound, represent just a few of the dynamic changes shaping the future of the U.S., global financial markets and the world economy. Now, by themselves they're significant. Together, though, they have the potential to dramatically alter the way we live, work, invest and interact with one another for years, perhaps decades to come.
Now, the best minds at Bank of America see these collective forces as part of a transforming world and they've written about it in a new groundbreaking report on the topic. Joining me now to share their insights into this global transformation and how Americans can think about the risks and opportunities presented are Candace Browning, head of Bank of America/Merrill Lynch global research, Chris Hyzy, chief investment officer for US Trust Bank of America private wealth management, and Christopher Wolfe, chief investment officer for the private banking and investment group at Merrill Lynch Wealth Management.
I thank you all for being with us, and Candace, with respect to this notion of a transforming world, what exactly does that mean to you?
MS. BROWNING: A transforming world to me means a world in which the engines of economic growth are changing, so the US consumer for so many years was the source of economic growth in the United States. Well, maybe that's changing.
See our A Transforming World report for more insights into these dynamic forces
You know, maybe U.S. manufacturing and actually producing energy in the United States is going to be a source of economic growth. So it's looking for those kinds of changes that are happening around the world, that's what it means to me.
MR. INSANA: And the definition for you, Chris?
MR. HYZY: Yeah, very similarly. When I take a look at it overall, there's imbalances everywhere. A transforming world is about closing those imbalances and taking advantage of it. And it's about changing what was the growth backdrop for the last couple of decades and what the new growth backdrop will be in the next two decades.
MR. INSANA: And Chris Wolfe, how about you?
MR. WOLFE: I think Candace and Chris did a great job of explaining the economic growth piece. That's the main driver but it's also about transferring capital markets. Growth opportunities are likely to be more global in the future.
I also think it's about the transformation of individuals and the way they think about investing, so where the opportunities may be under a broader set of global kind of umbrella, what I think it really means is investors have to have the willingness and understand themselves how they want to capture that.
MR. INSANA: So Candace, how can America--it's not just investors, but even consumers and citizens make sense of these large scale changes?
MS. CANDACE BROWNING: Well, it's a great question Ron, and to me what I think investors need to do is really embrace this idea of transformation and innovation.
Our analysis shows companies that invest in R&D tend to outperform the market
We recently actually did a report showing that those companies that spend on R&D do better in the stock market than those that do not and we also know that the American economy is viewed the world over as the scion of innovation.
And so what I would do is I would take those ideas about the economy and companies and I would use those for myself as an individual and embrace that idea that I need to know everything I can about this changing world, and my portfolio that I had in 2008 is probably not the right portfolio for today. More rebalancing and embracing change and transformation and innovation.
Our panel of experts from Bank of America Merrill Lynch and U.S. Trust share insights on what a rapidly changing world means for the way people invest.