Shares in Australian companies will offer the best returns for the coming decade compared to global peers.
That's the opinion of Milford investment analyst Roland Houghton, who presented at the ASX Investor Day last week in Brisbane.
Houghton noted how history has cycled between the S&P/ASX 200 Index (ASX: XJO) outperforming the S&P 500 Index (SP: .INX) and vice versa.
The technology boom and deflation themes that dominated the 2010s were massive for the US market, whose sector composition favours those themes.
But now that inflation is raging and interest rates are much higher, he's predicting ASX shares would dominate on the back of a "capex boom".
US$3 trillion per year
Why will there be an explosion in capital expenditure?
It's because there are three massive themes that will rule over the 2020s: decarbonisation, deglobalisation and demographics.
The first two will require massive amounts of investments in sustainable energy generation and infrastructure for each country to become more self-sufficient.
"Renewable energy generation is expected to double over the next decade," said Houghton in his presentation.
"US$3 trillion [is] the annual spend required for net zero [by] 2050."
And the Australian stock market has the perfect composition of industries to take advantage: dominated by mining and financials, plus industrials and energy with a significant presence.
Minerals such as copper, lithium, nickel, rare earths and uranium are "essential to transition" to net zero.
"Financials benefit through higher rates, credit growth, market leverage," said Houghton.
"GDP creates opportunities for old world industrials – engineering, services, manufacturing."
3 ASX shares that exemplify imminent Aussie domination
He named IGO Ltd (ASX: IGO) as a bullish stock riding on the back of decarbonisation.
"IGO owns high-quality Western Australia assets in lithium, nickel and copper, growing production that is fully funded," said Houghton.
"Moving downstream… reduces volatility and should improve valuation."
IGO shares have climbed 8.5% so far this year.
As for deglobalisation, Houghton predicted an "investment boom" for Western countries plus emerging economies such as Mexico, India and Vietnam.
Goodman Group (ASX: GMG) is the prime example of a beneficiary in this space.
"Global leader in industrial real estate [with] strong position in global gateway cities that are land constrained," said Houghton.
"Strong rental growth prospects and development opportunities, excellent management execution."
As for demographics, Baby Boomers have now retired or are doing so imminently.
According to Houghton, this will lead to a shrinking workforce, with severe consequences.
"Higher wages, higher inflation."
The stock that typifies investment in this demographic revolution is biotechnology giant CSL Limited (ASX: CSL).
Houghton described the company as the "global leader in plasma-derived therapies and flu vaccines".
"Collection volumes for blood plasma have recovered," he said.
"Manufacturing efficiencies to come, [as are] new products in iron deficiency and chronic kidney disease."
