Never invested before? Well, it is never too late to start and with the need for new hope in 2021, this could be your year. You might think it is a strange time to start. 2020 saw a rollercoaster of ups and downs for the market and many predict still that the result of the pandemic will be a Great Recession. It is clear that trying to predict the future in this context is challenging and maybe even foolhardy.
It is not just the pandemic that caused problems, there was a bitterly contested election in the US and some significant events placed at the feet of climate change, with hurricanes aplenty and wildfires that will reign in the memory for a long time.
Therefore, before we get to specifics, let’s fall back on some time-honoured advice that serves investors well. Investing in long-term with a low-cost diversified portfolio is the best way to go. You should be looking to check your investment balance rarely, as the changes will be small and incremental. In short, the tortoise, not the hare, is the way to win the race in these market conditions. Do not get caught up in the latest trends, as these are most vulnerable to panic and dips in fortune. A diversified portfolio will help you balance the gains and losses in equal measure.
While staying away from the hot trends is solid advice, you are still advised to keep an eye on what is happening around the world. So, let’s look at the issues that will influence investments.
Joe Biden’s election to POTUS
Biden hasn’t been shy in saying he will raise taxes on the wealthy. Such a move will have an impact on the market. Even though the market responded positively to his election, due mostly to the stability and certainly he brings, it is clear that there will be a correction soon in response to his policies.
The arrival of the vaccine
The success story of 2020 was the emergence of cutting edge technology that would deliver a much needed protection from the most serious impacts of COVID-19. The approval and distribution of the vaccines have signalled a beginning of the end of the pandemic and its adverse effects on the world economy.
Much of this success relies heavily on how quickly the vaccine can be distributed. It is not just a matter of getting it out across the developed world but also the countries where foreign aid will have to support vaccination. What the pandemic has proven is that we are a global community and international borders mean nothing to a pathogen.
How quickly we get past this stage of lockdowns and uncertainty will influence all areas of investment.
The obvious winner in this pandemic has been the pharmaceutical sector. The triumph of science over the virus has been a significant good news story – and a massive financial boost to the companies. The big winners, such as Pfizer and Moderna have cashed in handsomely on the victory.
As well as those producing vaccines, the companies producing therapeutics have equally done well. Regeneron is a drug known to save lives and so there has been significant demand for production.
There are other winners here too. Those companies distributing the vaccine are going to do well out of the pandemic. Global shipping of vaccines, some of which are highly volatile and require specialist carriers, will also be big business.
Pent up desire for travel
While travel might not be an obvious sector to keep an eye on, investors will be interested in the pent up energy in the market. There will likely be a massive rush to go away later in 2021 that will create a gold rush effect for the airlines and travel companies.
Tourism might be in the doldrums right now, with stocks massively depressed, but when the world is released from its prison, there is going to be a rush for freedom.
The casual restaurant chains are also going to benefit once a sense of normalcy returns. Those who have successfully pivoted to a takeout business will benefit from a loyal customer base who want to eat out as much as possible. The hint of a recovery was demonstrated with the rallying of restaurant chain stocks on the announcement that the Pfizer vaccine was 90% efficacious. Investors sensed freedom and got in early to cash in on increased desire to be free.
Work from Home
There are companies that have risen in fortune due to the need to work from home. Zoom has seen a massive surge in business and profits. However, they are also prone to announcements that the pandemic is coming to an end. On the same announcement that Pfizer’s vaccine was so effective, Zoom lost 20% of its value. The same is true of delivery services.
While the trend to working from home might continue to a degree, there is a recognition in some that the walk to the water cooler or the chat after a meeting add value to business. Some of the informal conversations lost to business have resulted in some of the more creative moments disappearing too. Formal meetings on Zoom might get the business of the day done but all the daydreams about the future are trapped in silos.
In short, assuming that companies that have thrived in the pandemic will survive post-lockdown is a tricky business. Nobody really understands what the sentiment of the population will be once the lock has been released.