What are the potential investment opportunities in a post COVID19 world?

Wall Street

What are the potential investment opportunities in a post COVID19 world?

The world of investing is all about staying on top of the news cycle to see how the latest bulletin can affect your current and future investment opportunities. A common way to invest in the stock markets is to try to apply those short term news bulletins to a longer term view to try to ride out short term rises and falls in the market and, hopefully, enjoy gains over the longer term – seemingly riding out any near term volatility.

2020 has been quite the year for volatility. COVID has been a difficult challenge for so many companies in so many sectors for so many different reasons. The lack of demand that the worldwide lockdown created was a seismic shock to the global economic system as a whole and was totally outside many traditional economic schools of thought and investment outlooks.

But now, so many months after the initial shock of the pandemic occurred, what potential investment opportunities are now available? Have investment outlooks from a year ago had to materially change or are they actually just as relevant in the long term in these highly unpredictable times?

Here, in this article, we highlight some ideas that could provide some interesting investment opportunities for the latter end of 2020 and beyond.

Global Population Changes

The changes in populations all around the world can help guide investment processes and decisions. Plus the structural shifts that materialize because of those changes cannot be underestimated. In some countries, like Japan for example, populations are decreasing or at the very least aging – which has a significant impact on productivity. Whereas in other countries, populations are growing causing upswings in demand for differing goods and services.

Importantly, depending on the average age of a society, governments allocate their resources in different ways due to the differing needs of their population. The repercussions of political decisions, that affect monetary and fiscal policy as a result, can then affect the global economy – particularly with respect to the largest economies of the world.

However, even before the widely seen lockdown measures, many governments were starting to work on a more national level than an international level. Deglobalisation may well have been exacerbated by the pandemic therefore as the lockdowns forced nations to look internally to protect the lives and livelihoods hoods of their people. The subsequent impact on investments that arise because of these shifts will be of great importance for a long time yet.

China

China is the second largest economic powerhouse of the world. Its influence cannot be underestimated or underplayed therefore. Its impact on the wider world’s economy and the investment opportunities that stem from it as a result require close inspection when making investment decisions.

The rising power of the middle class in China is of substantial significance in terms of demand for differing services and goods. Other issues to contend with in investment decisions with respect to the influence China has on the rest of the world, are the worsening US-Sino relations that give cause for concern on a political level. The difficulties caused with trade war tensions between China and the US has had a rippling effect on companies and businesses around the world and will no doubt continue to do so.

Finally, China, despite its quick rise to no.2 in the world rankings of economies over recent years, is also heavily indebted. While so many economies around the world also have a large portion of debt on their balance sheet, the lack of transparency surrounding the Chinese government’s approach to monetary and fiscal policy must not be overlooked. Making as fully informed an investment decision as possible is hard when so much of the Chinese government’s intervention is shrouded in secrecy.

Reliance on Technology

Until the start of September, tech giants like Amazon and Apple were the shining light of the stock markets. They had done extraordinarily well during the pandemic given that technology was what much of the world relied on during the lockdown as a way to work, shop and socialise. However, despite the mass sell off at the beginning of Autumn, technology should still remain a long term investment opportunity. The stark reason being that the world simply has so much to gain from technology – even when the COVID pandemic is over and lockdown restrictions are a distant memory. So much of what we do in modern life is connected somehow to a device or to the internet. The sheer amount of connectivity in our lives means that technology looks set to be a smart place to put cash.

Responsible Investing

Responsible investing provides an interesting investment idea – more so since the COVID outbreak. Before the pandemic, more and more investment decisions were being made with a preference to companies with a strong ESG framework. Investors themselves were realising the strength of their influence by investing in companies that had green initiatives and strong corporate governance – to name just a few increasingly important factors.

Now, since the pandemic, the world seems more preoccupied with the idea of investing in companies with an almost benevolent ethos due to a shift in outlook on life and society. For example, an awareness of our reliance on those in poorly paid jobs has been highlighted and roles that were previously overlooked are now well revered. Additionally, the fall in demand for air and car travel gave the world a big insight into how we can live without the services that create so many carbon emissions. That insight has made investors look to investment opportunities that are environmentally responsible as well as financially viable. Finally, with governments trying to spend their way out recessions around the world, many are looking to channel funds into greener initiatives to create jobs but also promote more environmentally friendly ways of living.

Investing In A Post COVID19 World

The pandemic acted as a catalyst for so many different longer term investment ideas that seem ever more relevant and pertinent now. Responsible investing in particular gained a lot of traction and coverage by market commentators in the initial wake of the global lockdown that saw planes grounded for weeks on end. Our reliance on technology was also emphasised which, despite some market sell offs in the early Autumn of 2020, seems not to be a trend that is going anywhere fast. Indeed, our reliance on technology only seems set to continue this Winter and beyond as many countries are faced with a second wave of infection, driving us back indoors.

However, it is important not to get distracted by the short term noise that COVID has created. While it absolutely should not be forgotten or ignored, keeping an eye on the longer term investment horizon can help direct investment decisions for the future.

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