Investment allocation among different asset classes and national markets is the significant determinant of a portfolio’s return.

While correlations have increased between different national markets, there have been vast differences in the performance of those markets. In the years ahead, three important factors are likely to have a large impact on the performance of the stock markets in different countries.

These are: the debt levels of both governmental and private units which will play an important role in the ability of different economies to sustain growth; demographic trends which will have a strong influence on the ability of a national economy to generate non-inflationary growth; and the end of cheap, abundant resources which will cause an increase in their value and favour economies of nations relatively rich in those resources. Investment policy has paid too little attention to these crucially important long-run trends.