Turning the Page: What Investment Trends are expected in 2021?

In short:

  • Around 19% of investment companies’ experts claim the healthcare sector to be the most successful equity market in the coming years.
  • “Work-from-home”-related stocks, such as Zoom and delivery services, will experience some losses in value.
  • The year of 2021 is expected to bring a boost for emerging markets.

The saying goes as, “A new year is a new beginning”. After the year that couldn't have been imagined in the most skillful Hollywood movie, 2021 is warmly welcomed by everyone, including investors that got into the real stock roller-coaster ride. Despite being hit hard, the investors learned valuable lessons that forecasting the stock market is nearly impossible as well as panicking is wealth-destructive. So, is it still possible, and most importantly, worth making any predictions for investment? Well, although it is hard to give any accurate predictions about some events and market responses, certain trends in 2021 are still worth taking into account in your portfolio investment.

To begin with, around 19% of investment companies’ experts claim the healthcare sector to be the most successful equity market in the coming years. There is no wonder “why”: the COVID-19 nightmare seems to be eased due to several vaccines being already out, promising the life will hopefully get back to normal. Any news of vaccine approval and distribution will be positively reflected in the stock markets returns at least until fall 2021. Moreover, not only vaccine-related pharmatheutical stocks will be booming, but also therapeutic drugs producers will benefit from the current pandemic, since there will be a great demand for post-covid health improvement solutions. Additionally, there will be market winners in that sector, which are not that apparent. Among them, producers of special equipment to carry vaccines and other drugs in storages, freezers etc. in order to sustain their effectiveness and companies taking responsibility to deliver life-saving drugs in extremely difficult conditions

Then, the pandemic pointed out the sharp need for innovation in healthcare from Biotech in curing rare and chronic diseases further and preventing the occurrence of the new ones. Therefore, innovations are expected to be produced by small-cap Biotech companies, that in turn will be taken over by large-cap pharmaceutical firms to fuel the science with resources. In results, experts anticipate a massive number of Biotech M&A activities with positive long-term returns. Given the fact that these companies will bring triumph for science, investors in the industry are ensured to be generously rewarded in returns.

Furthermore, in case the US researchers’ predictions about the vaccine effectiveness are true, travelling stocks will become attractive for investors too. Due to opening of possibilities for long-awaiting adventures, the demand for airline, hotel, cruise lines etc. stocks will jump by mid-June. The experts forecast that these stocks will outperform by 19% in 2021.The similar story is projected for the restaurant stocks. On the other hand, some stocks, previously benefiting from the strict curfews, will experience some losses in value. This is primarily concerned with “work-from-home”-related stocks, such as Zoom and delivery services.

Next, another interesting pattern for investors to consider is about the change in the US political arena that correlates with the stock market reactions. The preliminary US elections results already affected the stocks surprisingly positively, despite the absence of an expected “blue wave”, that means the colour unitedness of the President and the Senate. According to Smith (2020), S&P 500 rose by 60 % on average for observations of 7 divided governments in US history since the Roosevelt’s times. Therefore, the stock market will likely react favorably to the new divided administration as Democrat Biden will not be able to carry out previously announced tax rises for the rich. Furthermore, international relations with EU and China will be promoted by the Republican Senate. Worth mentioning that technology and healthcare sectors will benefit from election results too due to decreased fears of the tougher control.

Source: Kiplinger as of November 28, 2020. Where to invest in 2021 by A.Smith                                                   
Source: Kiplinger as of November 28, 2020. "Where to invest in 2021" by A.Smith  

Last but not least, the year of 2021 is expected to bring a boost for emerging markets, in particular for Asian countries, that are largely dominated by China. Specifically, Beijing is getting more exposure in the new year, because it masterfully stabilised the corona crisis as well as due to an expected favourable tone of political coherence by Biden. Consequently, the Chinese stock market successfully performed in 2020 with the 11 % increase at the Shanghai Stock Index as of November since the beginning of the year. Besides, several big companies, such as ExxonMobil, BMW and Allianz, have already increased their investment in China for fueling companies’ growth. Thus, China becomes an even brighter place for having stocks to buy in the eyes of investors in the coming years.

In conclusion, predictions are not definitive, therefore we cannot fully rely on them for our investments. Moreover, there are many more forces or events that can influence the stock market in a drastically different way than expected. However, this piece of information can be relevant for reducing investment portfolio volatility, which investors were wildly hit with in 2020.


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