Government debt burdens have swelled to historic highs across the world, fuelled by jumbo COVID-related fiscal spending plans, inflationary increases in benefit spending and rising debt interest costs. Governments increasingly struggle to keep their debt burdens at sustainable levels over the long term, with deep cuts in state spending difficult to achieve when parliaments are divided. Debt sustainability can be achieved over the long term through i) faster economic growth to boost tax receipts, and ii) financial repression by central banks and governments to achieve a lower cost of debt. These factors reduce the riskadjusted return of long-term nominal bonds.

Longer life spans and stretched government budgets require people to work longer before they retire. The average retirement age is set to increase in the years to come. Governments are introducing incentives to work via reduced taxes and social charges. This presents opportunities in senior consumption and services, e.g. in insurance and wealth management.