While it’s relatively easy to have an idea of global trends, it’s more difficult to make a connection between the economy of tomorrow and where to put your money today. Of course, the subtle signs can be read wrong, but if you’re paying attention to what’s happening in the news, you’ll likely be right more times than not.
Where to put your money for the economy of tomorrow: the growing global middle class
The growing global middle class will likely give companies long established in the developed world a second wind. Many of these stocks have been relatively stagnant over the years, as they essentially realized their full market potential. But those respective markets have grown to include the world’s surging middle class, which is already spending money on many of the same products those in the developed world have enjoyed over the years.
Aerospace and credit cards are two industries that stand out to me as having the most potential for growth. The next step is researching what companies stand to profit the most from these developments. The Boeing Company (NYSE:BA) and Mastercard Inc (NYSE:MA) have impressed me with their forward thinking abilities. While many companies are struggling to figure out how to make the most of the global village, these firms look to be leading the way.
Airline traffic about to take off: Boeing
With airline traffic expected to double in the next two decades, The Boeing Company (NYSE:BA)’s profits are set to soar. China already boasts 1.3-billion people, and the middle class segment is hitting new heights. That means many will be taking to the sky on vacations or business trips. To accommodate the increasing need, on June 18 The Boeing Company (NYSE:BA) launched its 787-10 version of the company’s Dreamliner aircraft. Already, 102 provisional orders are in, amounting to $30 billion.
The firm’s commercial airplanes segment accounts for 58% of the company’s earnings, with 40% from defense, space and security and 2% from investments. That means the company is well placed to take advantage of any surge in air traffic, as it has shown it is always able to handle a high volume of commercial orders. The firm earned over $1.2 billion from the commercial airline segment in the first quarter of this year.
MasterCard chips away at global expansion
Mastercard Inc (NYSE:MA) has identified China as a focus of expansion, and rightly so. About 300 million people in the nation are now part of the middle class, with the vast majority between 20 and 50 years old. That’s a demographic keen on spending money, much of it on credit. If Mastercard Inc (NYSE:MA) can get a stranglehold on China, it will be far ahead major competitors Visa Inc (NYSE:V) and American Express Company (NYSE:AXP).
While Visa Inc (NYSE:V) has made some moves in global expansion — mostly by improving technology so that American vacationers and business people can more seamlessly use their cards cross-border — it hasn’t focused on servicing those from other countries. (American Express Company (NYSE:AXP) hasn’t indicated much global expansion interest.) Visa and Mastercard Inc (NYSE:MA) are comparable in their efforts for worldwide expansion, but the latter has focused in on specific countries, rather than making sweeping changes to technology that better facilitates traveling Americans.
In fact, in addition to China, Mastercard Inc (NYSE:MA) has identified the Middle East and Africa as areas with major profit potential. The company is reportedly talking with Kenyan banks about facilitating the easy use of Mastercard Inc (NYSE:MA) in that country. About 80% of Africans currently don’t bank, but that looks set to change.