Post-pandemic investments – where to invest?
In this article we will briefly summarize the main post-pandemic world (second half of 2021) investments recommendations that we gave to our clients.
In our view, the global economy has potential to recover in full as soon as the vaccination levels increase and the spread of COVID-2019 decreases.
We expect reflation – the stage of recovery at which economic growth as well as inflation accelerates. We form our investors’ portfolios taking this into consideration.
Earlier we mentioned our preference for the financial and oil & gas sectors (the raw materials market). They have relatively low valuations, benefit from moderately high bond yields and have the potential of catching-up growth in comparison to other stocks.
Here are two ETFs in the financial sector that we prefer, and that investors should pay attention to:
Post-pandemic interest rates:
We also expect interest rates to remain below the rate of inflation. This means that investors who hold large amounts of cash or high-quality bonds are more likely to experience a decrease of their wealth in real terms. To increase portfolio returns in 2020, we significantly reduced the holdings of bonds and bond-ETFs and increased the holding of stocks in portfolios. For those investors who are used to receive regular coupon payments, we suggested to choose ETFs of dividend-paying stocks for their portfolios. Our choice:
- S&P 500 High Dividend Low Volatility Portfolio ETF (SPHD) (dividend yield – 4.29%)
- SPDR Portfolio S&P 500 High Dividend ETF (SPYD) (dividend yield – 4.87%).
Asian markets:
Post-pandemic investments should also be viewed through the perspective of the Asian market. This region has some of the most attractive growth opportunities in the world. It offers interesting ideas in the field of 5G, green and financial technologies and e-commerce. Chinese companies are leading in most sectors. We believe that emerging market assets, particularly of Chinese market, should always be represented in the portfolio of a long-term investor.
One of the recommended tools for investing in China:
Invesco China Technology ETF (CQQQ). This ETF is a good choice if you are interested in technology and communication stocks of Chinese companies.
Over the last 5 months, the value of ETF has decreased by 27%. The main drop was caused by a margin-call on the Archegos fund. It held assets worth more than $ 30 billion, most of which were shares of Chinese technology companies. Banks such as Nomura, Goldman Sachs, Morgan Stanley and Credit Suisse were forced to urgently liquidate their client’s positions. On March 29, Shoreline bought additional shares of this fund expecting a recovery of this sector in 2021-2022.
Our conclusion:
Our conclusion regarding post-pandemic investments: we bet on inflation and fiscal stimulus to continue. These conditions are more favorable for stocks and, in particular, stocks of resource companies. Our focus for the second half of the year: less bonds, more stocks especially focused on commodities, financials and emerging markets.
You can invest in individual stocks or via collective investments (index, ETFs) and this choice depends on the risk preferences and experience of each individual investor. If you are interested in this topic and would like advice about this selection – contact us. We will be happy to help!
