Should You Change Your Investment Strategy post Covid-19.

If the corona-virus crises has taught us anything, it is that “predictions are impossible”. The world has seen unprecedented levels of uncertainty. The economies shrunk and unemployment raised to record levels since the greatest of past recessions.

The world has changed after the Covid-19 crises, there are no second thoughts on it. There are different predictions for economic recovery trends. Hence, your investment strategy can vary by expert analysis too.

Even if you had held investments in a selective exclusive club of stock markets, your investment strategy would change for the future. We have seen certain trends emerging out of the Covid-19 pandemic crisis.

Let’s evaluate the investment scenarios in the post-pandemic world.

Economy Recovery after the Covid-19 Crisis

It has been one year since the covid-19 crisis was declared a pandemic. Economists and analysts are still divided over the economic recovery shape and time-frame. The uncertainty on the pandemic-caused economic recession is still the biggest fact.

There has been some positive economic recovery news globally after the vaccine accouterments. From a larger perspective, the economic world to return to a pre-covid19 world would take unthinkable time and effort.

V-Shape Economic Recovery

Some economists predicted a V-shape recovery model after the covid-19 crisis. In this form, an economic plunge is followed by a sharp economic recovery, once the cause of the crisis is mitigated.

U-Shape Economic Recovery

Proponents of the U-shaped economic recovery suggests that the economies around the world will recover gradually. The impacts of coronavirus on the global economy will last longer than many think. Given the historic trends, the U-shaped economic recovery is the likeliest outcome.

W-Shape Economic Recovery

Some experts correctly predicted the shock-waves of coronavirus could reemerge. The sudden recovery from the covid-19 crisis with lifting sanctions and government aid would soon vanish.

Some experts had predicted there will be a delayed economic recovery for some time. It is the “L-Shape” economic recovery.

Given the predictions and current scenarios, we can see most trends emerging one after another. In some regions, there has been a sharp economic recovery, for example, in the Greater China region. In the EU zone, the economic recovery is yet to materialize. In the US, there has been a double dip with the second and third waves of coronavirus cases.

New Globalization Trends

The globalization of economies has taken the final breaths, it seems. The world has realized the importance of borders again. As the pandemic caused wreak havoc, more countries realized they needed a decentralized economic and a resilient model.

If the experts predicting an end to globalization prove right soon, it would change the way economies behave. It certainly would change the way companies do business. In turn, your investments would never be the same again.

Economists had stressed the self-resilience economic model after the global financial crisis of 2008. The world continued the globalization path. This time, it will be harder to argue for globalization soon at least.

Covid-19 as the Accelerator

Some economic trends have accelerated during the covid-19 crisis. Some of the global sectors shrunk faster, others emerged stronger in the challenging times. Some technological and financial trends have risen already.

In the past one year or so, we have seen a sharp acceleration in the demand for telecommunication and live streaming platforms. The trends have only accelerated. The internet and tech developments had already started to shape the digital world. With pandemic restrictions, the demand for such sector applications accelerated.

On the other hand, sectors like energy and oil were already witnessing a plunge. The slowdown in the energy sector had started well before the covid-19 crisis could spread. Oil prices had fallen to an all-time historic low already. Again, the pandemic just accelerated the dip.

The most significant trends emerging out of the covid-19 crisis are dependent on technology acceleration. More sectors will need to adapt to a digital online world sooner than later. Businesses will have to adapt to the AI-driven impacts on the technology.

Digital Transformation

As an investor, if you want to access the impact of digital transformation, examine the tech stocks during the pandemic. Some of the world’s best-performing stocks during the covid-19 recession belong to Silicon Valley. The elite FAANG club flourished even during the economic recession.

Every business that adapted to the data and digital transformation survived well during the crisis. It also gives a hint on the future predictions of the exponential growth of digital and data-driven businesses.

The global transformation to digitization means there is no going back. The pandemic has provided many businesses an opportunity to transform. Broadly, sectors that adapt to the new imperative changes will flourish in an economic world of digitization, AI, Machine learning, and automation.

Which Sectors Remained Resilient during the Covid-19 Crisis?

If you want to rethink your future investment strategy, you must evaluate the performance of sectors during the pandemic crisis. Take a deep look inside the data from the companies performing well during the covid-19 crisis as well.

Some individual companies performed well, although, the sector remained negatively affected. For example, even when the restaurant chains suffered heavily, some innovative food companies like Domino’s Pizza could survive well. They simply adapted fast enough to cope with the challenges of home restrictions and new safety standards.

Data Source: Mckinsey and Co.

Although every sector faced a decline during the early pandemic days, some showed more resilience than others. We could see a similar pattern in the recovery stages as well. Many businesses within these sectors adapting to the technology and social changes performed better than others.

Data Source: Mckinsey and Co.

A comprehensive research report from Mckinsey and Co. shows that consumer durable, healthcare, media, and advanced electronics were the faster ones to recovery as compared to others. The mega 25 refers to the world’s top 25 performing companies currently that includes several Silicon Valley giants including the famous FAANG club.

How Should you Change the Investment Strategy?

Your emphasis should be to invest in the sectors showing resilience against the crisis right now. These are the sectors that have been showing the fastest recovery. Most likely, these are the sectors that will flourish soon.

Keep your long-term and short-term investment strategies separate. Allow an adaptive and flexible approach to your investing strategy. If we have learned anything in the past one year or so, it is the uncertainty factor.

Keep these new investment trends in mind while planning for a post-pandemic future.

  • E-commerce trends will continue to grow in the long run, the pandemic just accelerated the e-commerce trends significantly.
  • Large companies will look to consolidate their positions through diversification.
  • The boost for the health and pharmaceutical sector will prolong. The advancements made in the Pharmaceutical sector such invention of the Coronavirus vaccine will take the stocks further higher.
  • Communication and enablers of remote working will stabilize the growth in the long run.
  • The Travel and Hospitality industry will likely see a slower recovery in the long-term.
  • The Pandemic has accelerated a spark for innovation and acceptance of tech-driven trends. Businesses adapting faster to AI, machine learning, data science, and flexible working trends will succeed in a post-pandemic economy.

Where Should you Invest in the Future?

  As we have shown above, stronger stocks will emerge stronger out of the crisis. The Mega 25 including the Silicon Valley giants FAANG group will lead the recovery phase. Individual companies adapting quickly to the new normal of innovation will also stay competitive.

Some trends like work-from-home and social distancing are likely to continue in the near future. Companies adapting to such trends will stay afloat above the recession too. Investors will have to keep an eye on the economic sectors broadly as well as companies performing during the recession individually.

Here are a few important sectors that are likely to shape the investing trends in the near future of a post-pandemic world.

Healthcare Sector –Pharma Stocks

The Healthcare sector had seen unprecedented pressure in the last year and a half. The pharmaceutical companies have emerged stronger than most experts anticipated. These companies are likely to thrive soon as well with the invention of the coronavirus vaccine.

Sectors with Flexible Jobs

Businesses adapting to the work-from-home trends will stay competitive as they show flexibility. Similarly, tech providers that enable such technology to other businesses will also flourish. Think of stocks like Zoom, Skype, and Microsoft performing historically better than earlier.

Tech Stocks

There are divided opinions on the tech stocks in a post-pandemic world. Some experts argue that a halt in growth for tech stocks is long due. Tech-driven companies showed greater flexibility in the pandemic crisis. It remains to be seen how the tech stock would sustain the growing competition and keep pace with the technology demand.

The Exclusive Stocks

The top-performing stocks such as the FAANG club of the Silicon Valley thrived under pressure. Most of these companies witnessed a historic rise in their stock prices and market capitalization. If current trends are something to suggest, the strong stocks will likely emerge stronger.

Airlines and Travel

Airlines and the travel industry were the hardest hit sectors during the pandemic. Airlines had briefly resumed services before the second wave of covid-19 halted the much-anticipated recovery. It’s highly likely that the sector will see a sharp increase in the economic recovery phase in the post-pandemic scenario.

Be Mindful of The Energy Sector – Invest In Renewables

The energy sector had been under pressure even before the covid-19 crisis. Historic oil prices fall is the main factor behind the slump. The growth in the energy sector will be in the sustainable, greener, and renewable energy sources, if any.

 

The information provided is for educational purposes only and is not intended as investment advice for anyone. All information discussed is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The views presented today are those of WealthCare Financial and do not necessarily represent the views of AlphaStar Capital Management, LLC. The opinions expressed are subject to change without notice and do not constitute financial, legal or tax advice. Please consult your financial professional before executing any financial strategy.  Investment Advisory and financial planning services are offered through AlphaStar Capital Management, LLC, an SEC registered investment adviser. AlphaStar and WealthCare Financial are independent entities