Markets That May Thrive in the Post-COVID 19 Transition
The idea of investing during the transition period out of COVID-19 and back to ordinary life is one that’s beginning to generate a lot of attention. With effective COVID vaccines beginning to be deployed around the world, there’s a growing sentiment that we’ve reached the beginning of the end of the international crisis. And while it will still take time for enough people to be vaccinated for life to go back to normal, many are starting to eye the potential investing upside of the transition.
To be completely clear, we are not suggesting that this transition will yield bull market runs, nor even that any of the markets we’re discussing below are anything close to guarantees. However, if we assess the state of various financial markets right now, and consider what transitioning out of COVID will mean, these are some interesting areas to keep your eye on.
Conventional knowledge suggests that big oil could rebound in 2021 as the pandemic ebbs, consumer activity picks up, and oil demand increases. And yet even projections of oil growth suggest that it will still be below industry standards. Specifically, some predictions have oil demand in 2021 being 1.8 million bpd lower than it was in 2019, before the pandemic. This would still mark recovery from 2020, but it speaks to some of the more long-term issues big oil faces — which, incidentally, are resulting in new opportunities for renewables. Renewable energy has done well relative to oil in 2020, and growing investment on this front could mean that this is where we’ll see a “boom” in 2021, rather than in oil.
Even as some parts of the world have slowly gotten COVID-19 under relative control, the travel industry has remained largely stagnant. We’ve seen certain countries in East Asia and Oceania work out specific travel arrangements, and there is some coming and going elsewhere in the world. But by and large, travel remains on hold, ready to break out when vaccinations take wide effect. If all goes according to plan then, we may well see various facets of this industry — airlines, hotels, attractions, and more — surge at some point in 2021.
The S&P 500
The S&P 500 is a stock index measuring 500 of the biggest and most influential American companies. And it’s already performing quite well, demonstrating some of the almost bizarre resilience we’ve seen in U.S. stock exchanges. It should be treated carefully for this reason, as it has plenty of room to fall. But an index this robust that’s already performing well and which will benefit from increasing consumer activity (with companies ranging from Apple to Visa set to tick up) also has boom potential in 2021.
The Hang Seng Index
The Hang Seng Index, or HSI, is somewhat like the S&P 500, but instead tracks 50 major companies trading in Hong Kong. And with respect to the post-COVID transition, it’s a fascinating market to watch. Currently, HSI trading charts show a volatile 2020 marked by ups and downs, and therefore difficult to project. However, the HSI has ticked up somewhat since news of vaccines began to spread early in November. Additionally, it has more room to gain to get back to the highs of recent years, and — like the S&P — relies heavily on some companies that should benefit from post-COVID consumer activity. For these reasons this is an interesting space to watch, even if it’s not notably bullish at the moment.
The Forex Market
Forex is a little bit different, in that it doesn’t go up or down so much as get more or less active. And right now it seems likely that it will become more active in the post-COVID transition. The varying rates at which economies recover will affect currency values in different ways, and lead forex traders to try to capitalize on movement. On top of that, some have even forecasted a currency war for the coming year, which would be unpredictable but could inspire further volatility. For forex traders, volatility often translates to opportunity.
Biotech & Pharmaceuticals
Lastly, we would expect to see continued attention in the biotech and pharmaceutical markets as well. These the industries producing the equipment, medications, and now vaccines we need to combat the coronavirus. But they’re also the industries that are going to receive more investment as a preemptive measure against future pandemics. We’re likely to see a worldwide focus on healthcare and research like we haven’t seen in quite some time, which should translate to massive success for many companies in these spaces.
As stated, none of these are guarantees. We don’t know how soon we’ll be out of the grips of COVID-19, and we can’t say with certainty that these markets and industries will be affected as outlined here. Nevertheless, these are fascinating areas for investors to monitor throughout the post-COVID transition.