President and CEO
Alain.Roch@bluebridge.caSharing post-COVID investment opportunities may seem ironic at a time when management of the COVID-19 crisis will push as many as 150 million people into extreme poverty… The very role of a Family Office, however, is to generate ideas that are likely to create value for its clients and thereby have a positive impact on their families and the world we live in. That’s our mission!
Heading into 2021, the arrival of COVID-19 vaccines and continued government spending should accelerate economic recovery. Although the pandemic’s effects will linger throughout 2021, especially if there’s a third wave in February or March, great investment opportunities will abound for wealth managers.
The recovery’s pace will vary from market to market. While some Asian economies have almost completely rebounded, a second pandemic wave is dealing a hard blow to the U.S. and European economies. The recovery will be uneven across economic sectors as well. For example, the manufacturing industry and retail trade are expected to outperform the energy sector.
Lastly, Joe Biden’s presidential election win represents a return to normal that should lead to a pickup in growth and global trade once vaccination begins. In light of this, we expect a weakening greenback in 2021.
That being said, we have identified three investment themes that will enable our clients’ investment portfolios to generate value under the current circumstances: continue to invest in physical gold, target thematic trends in the equity market, and access further value through unlisted markets.
Short-term uncertainties are expected to keep the gold price in the $1,800 to $2,000 USD/ounce range. Even if this investment generates no income, it’s a relatively effective hedge against stock market volatility. The dollar’s depreciation could boost demand for physical gold, among other things. Later, once the recovery has taken hold and real rates have returned to more normal levels, gold should move closer to $1,650 USD/ounce.
Positive vaccine news has eliminated the worst-case scenario for economic recovery, making business cycle-sensitive securities, including small caps, more attractive and paving the way for a partial recovery in valuations and earnings in the travel, construction, materials, finance, and energy industry sectors. Demand for quality health and technology securities will continue in 2021, especially after the initial recovery phase, given their strong fundamentals.
In addition, there appear to be some not-to-be-missed trends that the COVID-19 health crisis has seemingly accelerated. An example is the sustainable investments that government stimulus packages will boost, similar to proposals under the European Green Deal or the U.S. Green New Deal.
However, that doesn’t mean you should sell all your shares in pandemic-boosted companies like Zoom and Netflix, not least because trends created by the pandemic, like telework, are here to stay at least partly.
Tangible investments, such as real estate, farmland, building land, forests, etc., are an essential source of diversification. Additionally, infrastructure assets are poised to benefit from massive public spending.
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