A megatrend is a long term change term change that will permanently and significantly alter society of the economy. An investment megatrend differs from cyclical changes in that it is not expected to reverse as a matter of course. It is a type of secular trend but to be regarded as a megatrend a trend must involve some kind of fundamental change. Examples include demographic changes (ageing populations), resource limitations (oil reserves running out), and technological changes.

From an investment point of view a megatrend may bring market growth, destroy markets, increase or decrease competition, or create threats and opportunities, or remove barriers to entry. These are primarily of interest to long term investors, but anyone, even speculators, who relies on fundamental analysis to any extent needs to look at megatrends. Many people would not frame the analysis in quite that way and regard megatrends as just more secular trends. At the other extreme are those who use megatrends as the basis for their strategy, starting their stock picking process by identifying sectors and companies (or even asset classes) likely to benefit from mega trends.

There is, of course, a huge range of disagreement about which megatrends are real, and how important each is. The term over which people look at megatrends also varies, with some looking as little as 10 to 15 years forward (no more than cyclical trends) and others looking many decades ahead.

As an example, consider a fairly simple and uncontroversial megatrend: the ageing population of developed countries (and many developing countries). This has many implications for investors:

  • Increased demand for: pharmaceuticals and medical services (especially for diseases associated with old age), housing for older people, prosthetic devices, et.
  • Shrinking markets for services and products for children and young people: education and textbooks, toys, children's entertainment and media, et. This is especially acute in places (such as Europe) where the overall population is expected to shrink.
  • The economic implications of a smaller workforce and higher government expenses: lower economic growth and higher taxation.
  • Industries on which the shift in demand is less obvious: e.g. travel and transport. Will people less able to drive use more public transport, or more taxis, or simply move around less? Would more retired people mean more holidays or will low economic growth mean low demand growth for leisure?

Also, note that some of the trends will be affected by other events and political decisions. For example, a significant rise in the retirement age (which now seems inevitable) would greatly reduce the problem of a shrinking workforce.