In the fifth instalment of our exploration into ten critical themes shaping the global economic landscape, InvestSense and Hunt Economics dive into: The Anglo Saxon Property Reset and Productivity and Energy that Doesn't Cost the Earth

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Theme 9: The Anglo-Saxon Property Reset

High property prices have become a significant obstacle to economic growth, contributing to inequality and limiting economic potential. The path to resolving this imbalance can take three forms. The first is property price deflation, a painful and disruptive process. The second is wage inflation, a less painful but imperfect solution. The third, and most desirable but challenging, is achieving real wage growth driven by productivity gains. This approach would restore balance without the negative side effects of deflation or inflation.

Investment Implications:

Short-term:

- Next 9 months are critical, largely dependent on U.S. election outcomes

- Risk of property market crash if real interest rates rise significantly

- Potential for continued price support if QE persists

- Need to monitor policy decisions in major economies

Medium-term:

- Possible "creeping inflation" scenario to restore affordability

- Risk of Japanese-style property price deflation if policy mistakes made

- Regional variations in property market performance

- Need for defensive positioning in property-related investments

Long-term:

- Property likely to underperform other assets

- Structural shift in property's role in portfolios

- Need to focus on markets with productivity growth potential

- Reduced role of property as a wealth creation tool

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Theme 10: Productivity and Energy that Doesn't Cost the Earth

Productivity growth is crucial to solving major economic challenges, particularly in energy efficiency and sustainability. Progress will depend on several key factors, including deregulation and reduced government intervention to foster innovation and competition. Breaking up monopolies will ensure a fairer distribution of market power, while education reform will prepare the workforce for a technology-driven future. Technological advancements will drive productivity and energy solutions, with sustainable energy being vital for long-term economic growth without harming the environment.

Investment Implications:

Short-term:

- Focus on companies demonstrating real productivity gains

- Opportunities in energy efficiency technologies

- Careful evaluation of "green" investments to avoid greenwashing

- Monitor government policy shifts affecting productivity and energy

Medium-term:

- Investment in companies driving genuine innovation

- Opportunities in sustainable energy solutions that don't require subsidies

- Focus on businesses benefiting from deregulation and market reforms

- Emphasis on education and technology sectors

Long-term:

- Strong performance potential for productivity leaders

- Significant opportunities in sustainable energy solutions

- Focus on companies driving real technological advancement

- Potential for substantial returns from breakthrough energy technologies

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The Anglo-Saxon Property Reset and the push for productivity growth are deeply intertwined. While the property market faces considerable challenges, productivity-driven wage growth offers a long-term solution. At the same time, advancements in sustainable energy are critical for ensuring economic resilience and growth in the coming decades.

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Next week, we will share a final wrap up of the key considerations that should be taken from these 10 themes for the next decade.  

Catch up on themes 1 & 2: China’s Minsky Moment and Asia’s broken model

Catch up on themes 3 & 4: QE Addiction and the Non-Bank Credit Boom

Catch up on themes 5 & 6: The Future Ain't What It Used To Be and Geopolitics

Catch up on themes 7 & 8: Japan & The Eurozone