The coronavirus pandemic has altered society in immeasurable ways, including, of course, investments. Stocks that benefited from people staying home, such as Netflix and Zoom Video, outperformed expectations in the past few months, while retailers and airline companies, among others, saw their stocks fall off a cliff. Regardless, the pandemic has exposed the fragility of our financial system and the chronic underinvestment in social infrastructure in both advanced and emerging economies. After a lengthy period of neglect, the gap between needs and investment has become unprecedented.
This period of volatility for markets has left a lot of business owners scrambling, but there is a silver lining: some businesses are now playing a bigger role in mitigating the crisis and supporting economic recovery, such as alternative payment and telemedicine, ed-tech industry, which not only contributed to maintaining continuity and accelerating the return to relative normalcy but also opened new pathways for providing quality services to those who previously did not have access.
However, now that we’ve almost reached the second half of 2021, the economies are reopening, and we’re starting to see new prospects and opportunities that are radically different from the pre-pandemic world. What shape will the recovery take? Will ESG investing come to the fore? Will alternative data help? Post-COVID-19 investment trends have been put under the spotlight, and different experts have shared trends that they believe will shape our lives—and create potential investment opportunities—going forward.
ESG will become a core investment theme
While the world faces the COVID-19 pandemic, it has become clear that there is an upcoming shift to rethink sustainability practices, business models, and investment priorities. ESG principles (environmental, social, and governance) are becoming front and center in everything we do and in the way companies are perceived by investors and society overall. With ESG standards being one of the most powerful and globally recognized tools to advance progress in sustainability, it is critical to ensure that we are well-positioned to integrate ESG in our current context.
Countries and investors that managed to proactively handle the health crisis, prioritize innovation, and reimagine the ‘new normal’ will bounce back more quickly.
The bottom line is that we’ll see a movement towards a circular economy mindset, where the environment, public health, and the global economy all intertwine. And as a result, investors are going to look for ways to align their investments with the long-term safeguarding of the planet and people’s lives.
New technology trends
The need for businesses to enhance their communications infrastructure, thereby accelerating both productivity and efficiency, has now become mandatory rather than simply pressing. The work-from-home and online shopping revolution that would normally have taken 10 years happened in 10 weeks. These activities will become entrenched and some companies are likely to reflect that in their real estate by reducing their city center footprint. New systems, new habits, and new patterns have emerged, changing our day-to-day lives forever, and this is likely to keep the information technology sector booming.
This is evidenced by the battle for technology supremacy between the U.S. and China, which will likely intensify in a new world accustomed to online entertainment and shopping, and where the need for tracking data to avert future health crises is greater than ever.
A Greater Focus on Health
After each crisis, people always try to prepare for a repeat of the same, rather than something completely different. Warning signs for a potential pandemic during the last decade fell on deaf ears, as many were trying to prepare for another 2008 financial/property crisis. Our focus on healthcare will therefore become sharper and more constant and will keep feeding into medical technological advancements.
Some of the concerns will be warranted (during COVID-19 many other health issues, such as cancer or heart conditions, have been left untreated) and some of them are exaggerated (the next crisis may well be something completely different). However, healthcare spending in our countries will likely be on a steep upward slope. There will be many societal changes following this pandemic and many implications for investors. However, we believe some of the opportunities are excellent, even with the uncertainty that remains.
Globalization and geopolitics
The risks inherent in outsourcing the bulk of production to a single specific geographic area were becoming more apparent due to issues before the current pandemic, not least due to the ongoing trade war between the US and China. The COVID-19 crisis has led both governments and businesses around the world to consider more deeply the vulnerability of their production capabilities, and so there seems little doubt that we will see an acceleration of the trend towards deglobalization and the reshuffling of global supply chains towards local production on a regional basis, already underway in several major economies over recent years due to a combination of technological innovation (allowing shorter supply chains), and rising wages (and therefore manufacturing costs) in emerging countries.
The significant commercial risks of economic stoppages and supply chain disruptions have been markedly exposed by the pandemic and, in particular, the high dependency of most global businesses on China’s manufacturing output. Governments have therefore responded by embarking on a range of initiatives designed to stimulate the increased domestication – or “re-shoring” as it has come to be known – of production capabilities.
The beneficiaries of this growing phenomenon will be local economies everywhere, with China almost certainly finding itself compelled to re-orientate its activities more towards domestic demand. Most governments will experience strong pressure to enhance self-sufficiency in strategically important areas, healthcare, and medical supplies being an obvious example.
In conclusion
If we broaden our perspective, history has taught us that crises can also act as triggers for substantial growth. Organizations currently struggling with the short-term impact of the crisis should start looking forward as soon as possible and capitalizing on the opportunities this crisis created. Organizations that are carefully observing current dynamics will see many trends rising. Some of them are triggered by major societal changes and will impact our future for a long time, the so-called megatrends.
Changes in consumer behavior (consumer trends) and market reactions (market trends) are already clearly visible. Technology will become even more important in enabling interactions between companies and their customers (technology trends). Companies able to leverage these trends will lead the game in the post-Covid-19 period because they built the foundation to serve new customer demands. After an intensive response crisis management phase, many industries are now shifting to a recovery phase in which they have to make decisions for future growth. The cards are reshuffled for a new game, and those who want to win should be aware of key trends which are either new or reinforced by the crisis.
