Since COVID-19 outbreak in late 2019, the global economic situation was soon on the edge. Uncertainty hit capital markets hard and investors are already realising that we have entered an economic landscape that will have long-lasting effects. Everyone from veteran investors to complete newcomers to the markets is on the lookout for lucrative investment strategies that will help them lead in the post-COVID world. In this article, we’ll unveil detailed investment strategies aimed at propelling you forward in these difficult times. From a robust analysis of all the relevant sectors to investment ideas for asset classes that are shaping up to be the most worthwhile in the post-COVID world, we’ve got you covered!
Understanding the New Economic Landscape
In the short term, we’re seeing huge impacts on consumer behaviour, government policies and global trade. Shifts in consumer behaviour prompted by lockdowns and the mass adoption of ecommerce will leave a lasting impact on how we shop, especially in travel and hospitality sectors, which have been most affected. A structural shift is already underway that is changing how businesses operate, adopt technology, and engage with consumers. There are also longer-term, more gradual macroeconomic factors we must consider. COVID-19 has likely acted as a catalyst for many of these transformations that were already taking place. For example, regulators and consumers are rethinking how to make global supply chains more resilient amid the risk of future disruptions. Investors must play close attention to these developments.
In response to the coronavirus pandemic and its economic damage, governments around the world have implemented vast fiscal, monetary and other policies. So, in our new world of finance, we have polices to make sure that financial conditions don’t become too tight something we’ve not seen in the past half-century. Low short-term interest rates, too much money-printing, and eye-watering stimulus packages all offer enhanced opportunities and at the same time, they bring fresh risks for investors. The effects of the climate crisis and a new and fast-moving environmental, social and governance (ESG) agenda is also changing the face of investment priorities. Obviously, contemporary investors should know all about these macroeconomic developments and how they are affecting so much of what they invest in and should be investing in.
Diversification and Risk Management
Diversification is central to smart investment strategy. I believe that the increased volatility of today’s market – post-COVID – makes this point even more compelling for investors to pursue. A well-diversified portfolio goes a long way toward warding off most economic shocks. As the pandemic emphasises, investments in non-correlated assets – including stocks, bonds, commodities, real estate – effectively insulate an investor’s capital. In a period in which our dependence on these assets is increasing, it serves to smooth the investors’ returns and preserves his capital when the value of any one of the assets declines.
It is equally imperative for investors to have the nimbleness in their approach to risk management, as evidenced by the title of Lebow’s book, The Uncertain World. Investors are urged to periodically review their portfolios and make the necessary changes in asset allocations to ensure that their portfolios are congruent with their risk appetites and investment needs. When rebalancing portfolios, hedging strategies can be used to protect capital from downside risks. And close monitoring of the factors that could be unsettling the market – eg, geopolitical events, regulatory changes and market trends – accelerates investors’ ability to detect the unexpected and take necessary actions. Good risk management not only helps to protect capital but can also ensnare more opportunities for long-term growth.
The Rise of Technology and Digital Investments
Amid the fallout from the COVID-19 pandemic, companies have rapidly embraced new technologies, making digital investments an enormous growth opportunity. Investors who want to profi t from the expanding co n nectivity of the digital world can consider allocating some of their portfolios to the technology sector, signif icantly expanding the number of companies they have exposure to. This can involve investing in individual technology stocks or in technology-re lated exchan ge-traded funds Examining the investable space poses two distinct questions. First, in which technology stocks should you invest, and, second, where are the hot areas? This article provides answers to these questions. Although technology investment is a broad asset class that encompasses many sub sectors ranging from retail to automotive, only investment in the information technology sub sector is discussed here. Specifically, the areas of focus include cloud computing, cybersecurity and digital payment solutions that play an intrinsic role in the growth of new technologies reliant on the internet (eg, ecommerce, telehealth, remote work).
On an additional note, fintech and blockchain are evolving new investment channels. Fintech companies have replaced conventional financial services with digital banking, money transfer, lending apps, and investing. With digital finance getting cheaper and safer day by day, more room for innovation is opening up. And blockchain, as a decentralised entrusted settlement technology that has the potential to revolutionise any industry by cutting out third parties, can be another play for investors to keep an eye on. Keeping up with key advancements in these new technologies can help investors explore possibilities of integrating the new literally new into their diversified investment portfolio. By embracing digital investments, investors can be in the driver’s seat in perfecting themselves and riding on the innovations brought by technology in the post-COVID era.
Sustainable and ESG Investing
Environmental, Social and Governance (ESG) investments, also referred to as sustainable investing, were one of the investment trends with the greatest traction during the COVID-19 market environment. ESG investing focuses on those companies that investors see as contributing to society or helping to address global concerns regarding ethics, sustainability and social issues. Once viewed as a morally superior investment without any economic advantages, ESG investing is becoming more attractive to investors as it appears to provide both positive social impact and the potential for financial gain. Investors are starting to realise that companies with a strong ESG focus tend to be better at managing risk, more efficient in their operations and show more potential for long-run profitability.
Bringing ESG guidelines into the investment decision process means assessing companies – what kind of impact are they making on the environment, how do they interact with their employees and stakeholders, how are they structured? The benefit of this approach is that it can help identify the kinds of companies that are best placed for a future that will be characterised by rapid change. Furthermore, the demand for ESG products and services is growing and driving innovation, creating new market opportunities. Investors can also benefit financially from investing in ESG companies and funds. Consequently, as the awareness of the challenges, such as climate change and sustainability increases globally, ESG investing is likely to become part of the mainstream investment portfolio.
Real Estate and Infrastructure Investments
Real estate, an important and often misunderstood asset class, has been upended by the COVID-19 pandemic. Interest rates are historically low, with central banks around the world holding policies at historic lows and, in some cases, negative, such as in Europe and Japan. The continued growth in capital values and healthy real estate return on equity are supported by these lower costs. However, due to the virus outbreak and its effects on the economy, the pandemic has created winners and losers within property. Broadly, residential real estate continues to prove relatively resilient, especially in areas with low interest rates, whilst we have seen office and retail space challenged by the shift to remote working and reduced face-to-face consumer activity respectively. We believe the current environment provides plenty of opportunity for investors. Residential – Residential property, both for owner-occupation and rented, continues to exhibit healthy growth in capital values and income, particularly in many suburban areas and city neighbourhoods, especially in many of those that have successfully emerged from the pandemic, with significant recoveries in employment. Commercial – In contrast, we see the office sector, together with retail space especially, affected by growing adoption of flexible working accompanied by changes in consumer behaviour. Buyers of commercial properties need to carefully scrutinise locations and the stability of tenants.
The second avenue is infrastructure investments with a longer time horizon. Governments are increasingly putting forward infrastructure development as a key policy for not only stimulating the economy out of the COVID-19 crisis, but also to achieve better resiliency within the economy toward future crises. There are many infrastructure projects having stable and long-term returns, such as transportation, renewable energy and digital infrastructure. Furthermore, infrastructure investments tend to have a low correlation with traditional asset classes, and thus provide some diversification benefits to a portfolio. Real estate and infrastructure can capture the value of essential projects underpinning the economic growth and improved living standards of society.
Health and Biotechnology Investments
The COVID-19 pandemic response mobilized the medical-healthcare industries in an unprecedented fashion, and the development of drugs and vaccines from scratch required substantial investments in drug research.
Getting involved in companies involved in vaccine development and subsequent medical research is a key to success in the current situation; let alone, the steadily growing healthcare tech sector. Consider allocating some of your portfolio to stocks in the healthcare/biotech sectors. The global population is aging, and the focus on general health and medical innovation will continue to grow in the years ahead.
Also in this arena, savvy investors can find favourable risk-reward opportunities with firms operating outside the traditional brackets of healthcare or pharmaceutical companies. Hidden among the noise lies biotechnology, a budding high-tech sector that promises to bring the miracles of gene editing and personalised medicine to market in the upcoming years. The risks are considerable, and often the rewards elusive; but if you can afford to take the rollercoaster for a spin, the wonders of biotech remain one of the world’s most compelling sandboxes for patient investors seeking an extraordinary future and the potential for healthy returns. Knowing how to read the signs of these healthcare and biotech trends can being with you closer to the future you deserve.
Conclusion
The post-COVID world will bring challenges to investors. But those who are prepared for it could see more opportunities than ever. For everyone looking to invest, Tuncer believes that keeping an eye on the new economic landscape and adopting robust strategies to grow and preserve gains during a period of continuation will be key. ‘It is better to invest in human capital,’ he says, ‘and to concentrate on companies that will lead the new economy, creating the next wave of growth and value. I believe investors in the post-pandemic market need to stay informed and dynamic. They need to be willing to deal with change and be prepared for anything.’ The strategies outlined here don’t simply detail ‘safe’ places to invest in the post-pandemic world. Instead, they’re geared towards helping investors to both protect and grow investments in the midst of significant change. The bottom line is, everyone needs a plan in this uncertain world. That’s the key to staying afloat in a changing market. Once people have identified a market equilibrium they’re convinced in, they can start to invest.
