Set your investment path as we approach 2021 and hear macro-economic views, portfolio strategies and tactics from 3 of the world’s leading financial minds. 2020 has been an extraordinary year of challenge for all of us on every level. What lies ahead for global economies, and markets? What are the most important considerations for investment portfolio’s?
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- The Growing Role of Fiscal Policy Affecting Markets
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Ofgem, the UK’s energy industry regulator, will allow energy networks to go ahead with a green energy investment programme into the country’s energy infrastructure worth over £40 billion, which will run from 2021 to 2026.
The programme is aimed at improving services, reducing the impact of UK energy networks on the environment, and setting a fairer price for customers.
In addition to a £30 billion initial payment to network companies running the country’s energy grid, Ofgem said it would make “unprecedented additional funding” available for green energy projects to arrive in the future, which will be aimed at reducing emissions from the energy system and eventually hitting net zero targets.
Companies have indicated that £10 billion of such projects could be in the works, though Ofgem added that there is no limit on the additional funding that it could provide, subject to good business cases being presented.
“Our £40 billion package massively boosts clean energy investment,” said Jonathan Brearley, chief executive of Ofgem. “This will ensure that our network companies can deliver on the climate change ambitions laid out by the prime minister last week, while maintaining world-leading levels of reliability.”
Brearley added that the costs incurred by the new investment “must fall fairly for consumers”, adding that the regulator would reduce the returns paid to shareholders by 40% to bring them closer to current market levels.
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Last month, Ofgem said that it is considering lifting its cap on household tariffs by £21 annually to help companies that have been struck by an increase in unpaid bills – meaning that millions of UK customers may pay more for their utility bills from April 2021 to help energy suppliers cover the cost of those unable to pay for energy due to the COVID-19 pandemic.
Giles Coghlan, Chief Currency Analyst at HYCM, offers Finance Monthly his insight on the possible impact the Biden administration will have on the markets.
The 2020 US Presidential election has produced what now seems to be a clear result: Joe Biden will be the next President of the United States. Interestingly, during the same week as the election, Pfizer announced that their COVID-19 vaccine was 90% effective, precipitating a major market rally as a result. Any market shifts that came a result of Biden’s victory were amplified by the positive market response to this pharmaceutical development.
However, it’s still worth considering what a Biden presidency means for British and American investors. COVID-19 won’t occupy the entirety of the Biden administration’s tenure, and the huge policy divergence between Joe Biden and Donald Trump means that we’ll undoubtedly see the financial markets reacting differently in the years ahead.
So, with this in mind, there are certain aspects investors could consider following Biden’s election victory. Although it’s still too early to make any concrete forecasts, especially with control of the Senate hanging on Georgia’s run-off elections, there are still important observations that can be made.
Checks and balances
Although the upcoming Georgia run-off senate race is being hotly debated within the US media, the reality is that Republicans will almost certainly retain control of the senate throughout the Biden Presidency.
For investors, this may represent great news. Analysis of all Presidential scenarios since 1945 reveals that a Democrat president governing with a split congress generated, on average, the best average annual returns for the US stock market – nearly 14% in dollar terms - according to UK firm Quilter Cheviot.
The reasoning behind this comes down to constraining what the President can accomplish. A split congress, as Barack Obama discovered in his final two years in office, can mean that much of what a President attempts to deliver is quickly impeded by filibusters and congressional obfuscation. This is especially the case in the senate.
Although the upcoming Georgia run-off senate race is being hotly debated within the US media, the reality is that Republicans will almost certainly retain control of the senate throughout the Biden Presidency.
But what could a split Congress mean for Biden? Ultimately, it might constrain his ability to introduce larger economic support spending, health or tax reforms, and climate-related legislation. Stocks and assets that performed well during the last four years would, in this scenario, largely continue to perform well. However, if Biden manages to clinch control of the Senate, how would his ambitious plans impact the markets?
All about tax
Trump’s most impactful economic policy, by far, was the cutting of the US corporate tax rate from 35% to 21%. Investors, traders, and CEOs all benefited massively from this, which is part of the reason why the Dow Jones has been making steady gains during Trump’s presidency.
Biden’s tax plan, increasing the corporate tax rate to 28%, would be seen as a huge blow to many US businesses. Although still 7% shy of the tax rate in place before Trump took office, many of the companies listed on the benchmark S&P 500 index could see their margins shrink if such tax reform was implemented.
The biggest winners from the Trump Tax cut, including AT&T, Hilton Worldwide, General Motors and Walgreens Boots Alliance, would all be hit hard from this shift in tax policy. Whether Biden is successful in enacting his envisioned tax reform, however, is still yet to be decided.
Technology on the horizon
The performance of technology stocks this year has been keenly observed by investors and traders. We’ve seen Apple become America’s first $2 trillion-dollar company and the working-from-home revolution facilitate a surge in remote-working shares, including Slack, Zoom, and Amazon.
A tech sell-off has already begun in reaction to Pfizer’s aforementioned vaccine development, but would this accelerate upon Biden moving into the White House? Democrats like Elizabeth Warren have vowed to do everything in their power to break up Amazon, Google and Facebook via anti-trust regulations; a move that could see millions of dollars of value wiped in an instant for these companies.
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Depending on whether Biden shares the ambition of his Democrat colleagues in this regard could facilitate a huge shock for investors in US technology. Those who own stock in, for example, Facebook may have to decide between keeping their shares in the core Facebook product or, alternatively, Instagram if a break-up of the company goes ahead. Although action of this kind is definitely more likely to occur under a Biden presidency, we will have to wait and see whether this transpires.
Preparing for 2021
In general, then, investors should be closely following US political developments if they own shares in any American-based companies or major stock indices such as the S&P 500. If Joe Biden is successful in the Georgia senate run-off elections, then it’s possible that many of his more ambition plans may be attempted, leading to huge ramifications across numerous asset classes.
The immediate reaction would likely be a large initial surge in US stocks in anticipation of a larger US stimulus package. Alternatively, a Democrat President and Republican Senate will likely facilitate much more political compromise in American politics, which itself guarantees a certain level of economic certainty that, subsequently, will allow financial markets to grow and grow.
So, in many ways, with the large amount of fiscal stimulus, QE, low Fed interest rates, and willingness for the US to take on debt, I believe the US stock market should ultimately benefit either way in the medium to longer term. We are in an age where fiscal conservatism is dying and that should boost US stocks over the next Presidential term.
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Ibbotson and Kaplan, in their 2000 study, demonstrated that asset allocation is responsible for nearly 90% of portfolio risk and return. With that in mind, if we seek to outperform the market — looking for the next Amazon or Tesla would surely do the job, but that will be the equivalent of searching for a needle in a haystack. A more realistic goal for the retail investor would be to overweigh their exposure to the right market sector.
In search of optimal portfolio allocation
Let’s start by first looking at some historical information that would help us align our expectations for the future. The time we’re living in currently is quite interesting. Nine months have passed since the start of the bear market in February, and the market is back to pre-crisis levels already. That might mean that the recovery’s tempo might slow down a bit but looking at the job market and the GDP figures — there’s undoubtedly more space for growth.
Since the 1960s there have been three sectors that have consistently outperformed the market in the early stages of economic recovery: Real estate, Financials and Consumer Discretionary.
The one thing they have in common is the boost from low-interest rates, as those are the sectors most dependent on credit. Of course, we should not fall prey to a time period bias, as no two recessions are quite the same, so we need to closely examine each sector’s prospects in the current COVID-19 environment.
Real Estate
Initially, this sector was one of the worst-hit, falling almost 40% in March. However, in the past few months, we’ve started to see a resurgence. The broader real estate index VNQ has outperformed the S&P almost 2 to 1 in the past month, returning 6% vs. 3.11%. One may ask, what led to this strange turn of events?
First, we see an unprecedented boost in residential real estate deals, stemming from the record-low mortgage rates combined with the increased consumer confidence in the summer months. Existing and new home sales skyrocketed in July to levels last seen in 2006!
While those figures show there’s a healthy demand for both multi-family apartment buildings and single-family homes, we’ve seen that there’s a clear winner in the residential space — single-family homes. We believe that’s the subsector that’s most likely to outperform due to the long-term structural changes resulting from the crisis. Two factors are most likely to drive growth in the single-family market segment. First, families facing job loss and weakened financial position are being priced out of the downtown, suburban areas. They are likely to drive up demand for rent in single-family properties farther away from the metro areas. Work from home is the second factor that we can’t help but acknowledge. When people no longer have to be close to their offices, they tend to move out to more affordable areas. Altogether — big cities lose their appeal when all their experiential amenities are closed, and WFH being a viable long-term option.
Some honourable mentions in this sector are data centres, logistics properties, and telecommunications infrastructure. These segments benefit from some healthy tailwinds from the COVID crisis, but this has been reflected in the price to a large extent. The YTD return on all three is currently in the double digits.
We believe that the biggest opportunity for abnormal risk-adjusted return in the real estate field is in the residential market. It has always been one of the most stable parts of the market, the tailwinds are starting to materialise just now, and the broad residential index is still down almost 10%, signalling that there’s still plenty of room for growth.
Financials
In this sector, unfortunately, the prospects don’t seem as promising. It’s considered to be one of the best during the early stages of economic recovery, and it may look like it’s doing well again — the XLF has outperformed the S&P in the three-month and six-month time frames. This run-up has been caused by the generally positive market sentiment around the vaccine news. Banks were severely battered in the first couple of months of the recession, so they had some more catching up to do. Some believe that the rally depends more on the regression to the mean than on the industry’s actual fundamentals.
We have to address the elephant in the room — interest rates.
Central banks in all parts of the western world slashed rates to 0%. In the short term, that actually looks good for banks, as their profits jump due to the appreciation of their existing fixed income securities. However, when interest rates are at 0% for an extended period, adverse side-effects appear. Namely, there’s a reduction of the net interest margins, which leads to a slower expansion of loan books and balance sheets, hence the reduced profitability. During the most recent meeting, the Fed signalled that interest rates might remain at 0% until 2023! Considering the impact on margins that this may result in, the risk/return profile is currently not overly appealing.
Consumer discretionary
Consumer discretionary has always been one of the most cyclical sectors. This time around, though, the performance between the individual components is highly varied. The consumer cyclical index XLY is still up nearly 26% YTD, double the S&P returns. However, this performance is only caused by the few top holdings of the index. Amazon has been a considerable driver behind this — being up close to 70% YTD! On the other end of the spectrum, we see travel services, lodging, and resorts, each being down YTD. With the vaccine news coming up, and consumer spending back to pre-COVID levels, we expect the tide to turn with time. The big e-retailers indeed had a good time during the past few months, but the valuations are starting to look a bit crazy. On the other hand, there’s still plenty of bargains in the lodging/resorts sub-sectors. Of course, there are many risks involved with these stocks, as they are currently burning a ton of cash, and the leverage levels are also high, but that’s the high-risk, high-reward play.
Auto manufacturers are also giving online retail a run for their money. As of the 25th of November, Tesla is up 563%. Those, however, are rookie numbers compared with NIO’s cosmic rally of 1200%. Now there’s much speculation going on with the EV stocks these days, and no one will argue that some of the valuations are a bit disconnected from reality. It’s just momentum traders piling on the next ‘big’ thing. However, we must not fully disregard this, as it’s pointing us to a hint about the future.
Assets under management in ESG funds have quadrupled to $250 billion in the past three years.
The rise of ESG investing
Younger investors are especially concerned with their investments’ environmental implications, and they are putting their money where their mouth is. Assets under management in ESG funds have quadrupled to $250 billion in the past three years. And the speed of capital accumulation in this field is increasing. That means that all active investors should start seriously evaluating the ESG factors of the companies they invest in. Being in the right sector is the first step towards achieving superior risk-adjusted returns, but for the years to come — investing in stocks that have positive ESG scores will help to maintain momentum on your side.
Recent history has demonstrated that successful tech industry stocks realise exponential growth and consistently outweigh other sectors. One only has to look at some of the largest and best-known companies in the world like Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN, Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) to understand that investing in the right technology at the right time will reap substantial returns.
The 2021 IPO season is offering some big names in technology, which will dominate again, but investors will also be looking at those companies that have flourished and will continue to do so, during the pandemic and after the pandemic. Indeed, because of COVID-19, health tech has moved inexorably to the front of the queue for many investors.
Here are our top five IPO tips for educated investors looking for long term windfalls in 2021.
Coinbase
Coinbase is not just a crypto firm, it is a full 360 FinTech story which handles payments, debit cards, trades and VC investments.
It is now a recognised brand with a strong following. Indeed, in the world of crypto, the “Coinbase effect” is fast becoming a colloquialism.
Coinbase is the most respected platform to access the crypto market. All coins listed there get an immediate and huge recognition by cryptocurrency adopters.
Blockchain technology is becoming institutional and besides the recent rise of Bitcoin, cryptocurrencies became an attractive asset class for many institutional investors, mostly in times when liquidity was lacking.
Coinbase offers a good option for investors to get exposure to the asset class. As investors are looking to enter the space, waiting to find the best fit, Coinbase sits at the hedge of retail and institutional clients. High margins and the huge potential of monetisation for its client base make it a definite company to add to investment portfolios.
Uipath
Uipath is a global software company that develops a platform for robotic process automation and is one of the market leaders in its field.
The current COVID-19 pandemic has hastened the need for automation and has, in turn, brought a huge growth potential for Uipath. COVID-19 was the best challenge to test the company’s automation and its ability for remote working.
The company disclosed that it has over $400 million in annual recurring revenue, a metric that measures its predictable revenue from subscriptions and returning customers. This is music to the ears of investors as strong revenue, growth, having major clients (Uipath boasts 6300 clients worldwide) and diversity across industries are all hallmarks of a company with great potential.
In addition to this, Uipath is now a free cash flow positive company, which is a wonderful thing for a company in the tech sector. “We are on the verge of becoming free cash flow positive very soon, maybe even starting with this quarter, so we don’t need the money from an operational perspective. It was a strategic fundraise”, Co-founder Daniel Dines said, commenting on their recent fundraise.
Oscar Health
Public markets are attracted to InsurTech stories (see the Lemonade example) and currently, there are not many listed players in the space. Oscar Health is a top player in the field, with more than 420,000 members across its individual, Medicare Advantage and small group products available in 15 states and 29 US markets.
Oscar positions itself as the first direct-to-consumer health insurance company, where the customer is at the centre of the value proposition. The company's Net Promoter Score is 36, which compares extremely favourably to the industry average of -12. App engagement and downloads are also way higher than industry standards.
The company has also increased partnerships with strategic players, such as their partnership with CIGNA, to provide commercial health solutions to small businesses.
Oscar also has an aggressive expansion plan to deploy its solutions in many other states in the US. In July this year, the company announced that it is expanding its health insurance products into four new states and 19 new markets to sell coverage for individuals and families in 2021.
Better
Better is a company which has streamlined the mortgage process, eliminating fees and unnecessary steps in an attempt to provide people with a more efficient and easier way of buying a home. This has translated into the best rates available. By fully digitalising the process with full automation, it is destined for great things.
The mortgage market is increasing, and loans are in high demand due to the low-interest rates during the pandemic.
The company is focussing on diversity, single women, and minorities – in short, those who have not been served well by traditional banks historically.
INDIGO AG
Indigo Ag took the third spot on CNBC’s Disruptor 50 list. The $3.5 billion AgroTech company uses AI and machine learning technologies to advance the field of agronomics and contribute to healthier farms across the US.
Looking at the big picture, this is the right company, using the right technologies, in the right space, at the right time - with a combination of technology and sustainability. It is doing this by delivering value for growers and the environment while expanding consumer choice.
It is also disrupting the full value chain in one of the most traditional and archaic industries. It might be one of the first AgroTech companies attracting interest from ESG investment managers.
*NO INVESTMENT ADVICE - The content is for informational purposes only and should not be construed as financial advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, or offer by Fiorenzo Manganiello or Nessim Sariel-Gaon or LIAN Group or any third-party service provider to buy or sell any securities or other financial instruments.
Karoline Gore explores the current state of the EV market and the trends that have sparked its rise – and what this may portend for automated vehicles too.
The electric vehicle (EV) market is one that has an absolutely undeniable place in the future, but investment markets haven’t reflected that in value. According to experts providing comment in USA Today, Tesla saw a bear market in the early part of 2020, before striking upwards into their now sky-high value. A few key events have led to this surge, but they’ve now successfully started a trend. For a few key reasons, EVs have now established themselves as a bull market that will continue to rise – and big names are showing the way.
Big companies buy in
Tesla and their associated manufacturers are, of course, big names, but they lack a little bit of credibility as compared to the old-school big American auto houses. While EVs have an unassailable status as the future of the automotive market, it’s been a slow process to get these older manufacturers onboard. This has changed with the huge market intervention of GM, who have recently put $2 billion into EV production to up their share of the market. This has led to news outlets, including CNN, advocating an investment portfolio that looks into companies like GM – a sharp change from recent months; March saw their stock drop to a low not seen since before 2012. This type of disruption from the institutional auto manufacturers of the USA indicates the upwards trend and interest in the market; something which should only continue to become more relevant in a geopolitical sense.
Geopolitical movement
The Trump administration has been broadly opposed to green measures, whereas a Biden government has promised to become more climate-positive. Whatever the ultimate outcome of the election, there are indications that public opinion will keep moving forward in favour of green measures. According to the BBC, areas of industry and energy production have continued to grow where they favour green measures, and shrink in areas where they rely on fossil fuels and processes harmful to the environment. This points towards a future where society is dictating what products they want, and that’s a good one for EVs – especially when considering their logical, efficient endpoint.
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The automated revolution
EVs will ultimately give way to automated vehicles. There are already plenty of models on the market that achieve 1 and 2 stage automation, meaning that the driver still has most control, with stage 3 being absolute control by the computer of the vehicle. This is the logical place where EVs will move to in the future, and offers huge benefits for business. Businesses as huge as Walmart have already invested heavily in the technology, given the benefits it can bring to the bottom line. As a result, automation can only grow, and putting money into the industry will only yield returns as the years go on.
For that reason, this form of investing favours a long-term view. That being said, it’s a good time to start getting involved – before huge gains are made by the big auto houses and the industry is swamped.
Alpa Bhakta, CEO of Butterfield Mortgages Limited, explores the current landscape of London property investment and how it may soon shift.
During the last five years, the prime central London (PCL) property market has witnessed significant shifts and spikes in demand and supply. However, nothing could have prepared the market for the immense impact of the COVID-19 pandemic and the consequential UK-wide lockdowns.
The economic ramifications of the novel coronavirus pandemic will undoubtedly be felt across the global economy for some time. But, when it comes to the UK prime property market, there is more than one reason to be optimistic about the future.
Alongside numerous other measures introduced to encourage consumer spending and investment activity, the UK government announced a series of measures to support transactional activity across the real estate market.
And, in this, the government has been successful. Recently, the property market witnessed its fastest rate of house price growth in over four years. This is very much a result of the Stamp Duty Land Tax (SDLT) holiday. No wonder, given that the tax relief policy allows anyone – from first time buyers to seasoned buy-to-let (BTL) investors – to save up to £15,000 on British property purchases.
Based on experience helping clients navigate the PCL property market, I’ve noticed multiple trends that potential PCL investors should keep abreast of over the coming months. As England navigates its second nationwide lockdown, the precise nature of the capital’s property market remains uncertain. Nonetheless there are certainly things for those interested in prime property in the capital to be on the lookout for.
Recently, the property market witnessed its fastest rate of house price growth in over four years.
London: the jewel of UK property?
With remote working set to remain a reality for many of London’s professionals, some property commentators feared a collapse of the PCL market as newly homebound workers fled to the countryside. This has demonstrably not occurred.
Although some shift in buyer demand away from central London and towards quieter, more suburban areas was recorded by Rightmove, this trend’s impact on the PCL market is seemingly minimal.
Despite the so-called working-from-home revolution, the market for properties in central London worth in excess of £5 million has been one of the most active sectors of the UK’s real estate market throughout 2020. The number of transactions involving such properties was 13% higher during Q1 2020 than during the same period in 2019; and Q3 saw more PCL housing sold than during any other quarter since 2015.
Even within the £5 million + London property market, over half of all such sales are located in just five postcodes, according to Savills.
The driving force behind this spike in activity is multi-faceted. Yes, the previously mentioned government initiatives to support the UK property market are partially responsible. But, given that the SDLT holiday only protects the first £500,000 of a purchased property’s cost from the tax, there must be other underlying forces at play.
One such force is the SDLT foreign buyer surcharge. Due to be implemented on April 1, 2021, this added 2% tax for those purchasing British property from abroad represents a massive intervention into the PCL market. In H2 2019, such buyers represented 55% of all PCL transactions.
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A motivating factor for many foreign buyers at present, then, will be to avoid this added cost. This trend will likely continue until the currently scheduled end of the SDLT holiday on March 31, 2021, with international investors keen to complete on transactions before this key date. Reportedly, 22% of such buyers are so keen that they’ve purchased property without a single viewing, according to London Central Portfolio.
With such an impressive year for transactions numbers then, I believe that the PCL property market’s prospects should only improve as COVID-19 is brought under control. At the moment, that could be sooner rather than later based on recent vaccine announcements.
As it currently stands, the PCL property market looks set to remain strong for the foreseeable future. Buyer demand from domestic and non-UK residents is increasing the number of transactions taking place, demonstrating the underlining attractiveness of prime property as an investment venture.
However, are there also cases in which these practice accounts would be used by more experienced traders, and if so what are they?
The Features That They Offer
To understand why people of different experience levels use demo trading accounts, we need to first of all take a look at what features they include. Generally, they will offer a full range of functionality, allowing users to carry out similar trades to those which they would make with real money.
Some trading services offer a fully functional demo platform that can be accessed on desktop or mobile devices. Support and education is also provided to users, including a selection of webinar sessions.
Through demo trading accounts, users can trade products based on stock indices, commodities, forex, and economic event markets. They can carry out the full transaction from start to finish, letting them see how much money they likely would have made or lost on a comparable real transaction.
A Way to Try Out New Strategies
For an experienced trader, perhaps the biggest reason for using a demo account is to try out new strategies. For instance, it could be used to attempt an advanced scalping forex approach, or to use triangular arbitrage techniques.
Most traders will have one or more strategies that they feel completely comfortable with. Yet, in different economic situations it may be necessary to turn to new strategies that they have never used before.
By doing so with a demo account, the risk of any financial loss if it goes wrong is removed. Any mistakes that the trader makes on the new strategy adds to their learning experience without causing any negative effects.
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The Option of Looking at Different Markets
It may also be the case that a trader is experienced in one market but would like to diversify into another. One example is that they may be a forex expert but decide that they want to try and make money from stock market trading too.
This could happen because they feel that the market they currently focus on doesn't offer good investment opportunities right now. It could also be the case that they want to test themselves or just explore new ways of using their skills to potentially make more money. There are advantages and disadvantages to both stock market and forex trading to be considered.
In this situation, their existing knowledge will be useful, but there will be gaps in their expertise that need to be filled in. This could be in terms of learning new strategies or in discovering the tools that give them most value in their new type of trading.
Every Trader Can Use a Demo Account from Time to Time
An experienced trader might go through long spells in which they don't have much need for a demo account. Yet, they are also likely to find that it is something that comes in handy at certain times.
More than just a list of strategies and methods, a plan gives you a goal to focus your sights on as you’re working your way towards financial independence. With the right solution in place, you’ll know how much to save, how much to spend, and when to switch courses.
The first step in developing a successful plan, is to complete a cash fact find. In other words, take stock of your current situation. Do you already have an emergency fund in place? If not, you’ll need to deal with that before you begin looking into stocks and funds. How much do you feel comfortable investing in different assets, and what risk level are you comfortable with? Once you have that information, you can begin to work on your plan.
Laying Out a Basic Strategy
Drawing on the information you have from your fact find, you should be able to set out your goals for your money and the kind of things that will help you to achieve them. For instance, are you going to be looking into swing trading strategies, or long-term investments? Your time frames for when you want to reach your targets, your current financial situation and your risk appetite will all help you to figure out where you should be heading. Your plan can also give you an insight into the kind of returns you need, and what you can expect to reasonably accomplish. If you’re having trouble with this part, it may help to speak to a qualified advisor about your options.
You can also speak to an advisor about how much of your plan you want to handle on your own and how much you need to get assistance with. You can also determine how frequently you’re going to check on how your strategies are doing, and under what circumstances you might make changes to your portfolio. Check out any kind of fees and product charges you’ll need to think about at this time too, so you know what’s going to be eating into your earnings.
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Putting your Plan to the Test
Once you’ve got a basic idea of how you’re going to reach your goals and what you want to accomplish with your money, the next step is putting your strategy into action. The important thing to remember here is that you can take things slow until you figure out whether your strategy is really working for you. There’s no need to spend a small fortune on your initial assets and shares straight away. You might even decide to do some paper trading first. This essentially means that you open a demonstration account where you can see exactly how profitable your efforts will be in practice. You won’t make any money with the paper account, but you can put your ideas to the test without any risk too. Remember to come back and update your plan from time to time when the situation calls for it.
However, Pfizer wasn’t the only company to benefit from a successful trial. Shortly after the announcement, we saw a stock market boom. The Dow Jones Industrial Average in America was up by more than 1,000 points on Monday and the FTSE 100 in the UK ended the day 276 points higher, a rise of 4.67%. So, with news emerging that a working vaccine is on the horizon, what will the next six months look like for hedge fund managers and investors? Let’s take a look.
How do Hedge Fund Managers View the Pandemic?
Although news of the Pfizer vaccine is positive, it does not signal an end to the current ways of working and living. After all, this is only one trial, and even if the vaccine continues to be successful, the distribution of the vaccine will still take around a year. As a result, it’s unsurprising that many hedge fund managers still expect that the coronavirus pandemic will still negatively affect their investments. Overall, 86% believe that the pandemic will have either a ‘negative’ or ‘very negative’ impact.
That being said, the vaccine news is still a huge positive. Due to this, if the successful trials continue, the vaccine may change the outlook of hedge fund managers as long as they adapt their strategy in order to take advantage of opportunities that emerge in a post-COVID world.
What Sectors will be Popular Investment Options?
Due to the fact that the vaccine will first be given to vulnerable people over the pension age, it seems likely that the ‘new normal’ work from home dynamic will continue for at least the first half of next year. As a result, expect tech stocks to receive significant investment. The vaccine news actually caused Zoom stock to plummet by 15%, but this may be short-sighted given that the vast majority of us will still rely heavily on this form of tech in the next 6-12 months. Plus, if the virus fundamentally changes the way that we conduct business, and working from home becomes the norm in some industries, then this technology may be here to stay.
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Similarly, for many people, the coronavirus pandemic has changed our relationship with our bodies and our minds; particularly because self-isolation and lockdown have made us think more about how we look after ourselves without gym access. As a result, expect well-being providers such as Peloton to build on the 350% growth they’ve seen this year.
Finally, it’s important to remember that the Pfizer vaccine is just one of the options available, and we’re still waiting to hear trial results from other vaccine providers such as AstraZeneca, Janssen, and Valneva. Should their trials also be successful, expect their stock prices to skyrocket on the announcement.
In summary, although hedge fund managers still believe that the pandemic will have a negative impact on their funds, the Pfizer vaccine provides us with a glimmer of hope that life may return to normal by the spring. As a result, for hedge fund managers and investors, this hope presents an opportunity. By adapting their strategy to purchase stocks in areas likely to see growth such as tech and well-being, proactive hedge fund managers may be able to overcome at least some losses and could potentially come out of the pandemic unscathed.
2020 has stretched the volatility of the stock market, but that has been more of an advantage than a disadvantage to shrewd investors. When looking for good stocks, it is always advisable to ignore the short-term volatility and focus on the long term. We have discussed the best stocks to invest in as we approach the end of 2020 with both short-term and long-term performance in mind:
1. AMZN stock
AMZN stock has been on one of the wildest growth curves of the past couple of years. In November 2019, it traded at $1,700 per share. Now it is up to more than $3,340.
AMZN's earnings are predicted to grow 20%, meaning a share could go for a whopping $4,000 in 2021. The reason for this is that the pandemic is still around, and people prefer online shopping to in-person store visits. Secondly, the company is expected to keep on with its tradition of running ahead of the festive season. Thirdly, online shopping is high on the rise with or without the pandemic, and Amazon is the clear leading light in the industry.
2. Broadcom
Despite the pandemic, Semiconductor builder Broadcom has kept on with its dividend growth for the ninth year in a row. The stock's short-term value has also been tipped to continue rising with an increase in demand from telecom and cloud data center service providers being recorded. The 5G iPhone surge and WiFi and RF content increases are also expected to spark a wireless industry growth from October going forward.
3. DiamondPeak Holdings
Lordstown Motors and DiamondPeak Holdings made a merger agreement back in August. Despite the combination still awaiting completion, the news set off a 140% growth for the DiamondPeak stock.
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It may seem too late to make a move, but the latter months of the year are expected to cause another sudden change in the growth trajectory, with Lordstown Motors now having a whopping $675 million to finance its growth.
4. Wheaton Precious Metals
Gold has always been risky, but these are different times. The federal and state governments have imposed stay-at-home orders for the first time in decades, and that has made the Wheaton Precious Metals stock quite intriguing. Lack of monetary weapons in the Federal Reserve prompts the adoption of accommodative policies, and that sounds like great news for gold.
5. Smith & Wesson Brands
The US election date is fast approaching, and with Joe Biden and Kamala Harris going into the race with a good chance of unseating Donald Trump and Mike Pence, there are fears among gun advocates that the pair will look to enact new gun legislation. That, of course, would be a win for Smith and Wesson, and while the fears alone are expected to spark a surge, it is a win for the Democrats that is expected to cause the ultimate stir for the firearm manufacturers.
Endnote
The stock market is not one to abide by expert predictions. However, if 2020 doesn't have any more surprises in store for us, the above stocks should deservedly be somewhere up in your list of considerations.
US automaker General Motors plans to hire 3,000 new employees to strengthen its engineering, design and IT divisions, the company announced on Monday.
The hiring is expected to take place from now through to the first quarter of 2021 and will be largely focused on software development. GM’s stated aim for the hiring drive is “to increase diversity and inclusion and contribute to GM’s EV and customer experience priorities.” The company also said that it plans to include more opportunities for remote work.
“As we evolve and grow our software expertise and services, it’s important that we continue to recruit and add diverse talent,” said GM President Mark Reuss in the release. "This will clearly show that we’re committed to further developing the software we need to lead in EVs, enhance the customer experience and become a software expertise-driven workforce."
Ken Morris, GM Vice President of Autonomous and Electric Vehicles Programs, said in a call with reporters on Monday that GM has accelerated the development of at least two upcoming electric vehicles following the debut of its GMC Hummer EV, which debuted in October.
“We’re moving as fast as we can in terms of developing vehicles virtually, more so than we ever have by far,” Morris said, adding: “We are doing things virtually, more effective than we ever have.”
Earlier this year, GM said that it planned to invest $20 billion in its new generation of electric and autonomous vehicles by 2025.
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Shares in GM reached $39.72 ahead of the announcement on Monday, a 52-week high. The stock rose 5% in early Monday trading following investor optimism over a promising COVID-19 vaccine and President-elect Joe Biden’s supportive policies on electric vehicle development.
