How the pandemic influenced the investors and the US Markets

Source: Reuters

Sitashwa Srivastava

After a year full of unpredictable twists and turns, people have been waiting for a fresh start and look up to 2021 as a year that will bring more hope, better returns, and some stability in the economy.

Despite being a tumultuous and challenging year, 2020 set a foundation for a more resilient, digital and flexible world that will open-up new avenues of work, income, and growth.

Although the transition from office to work-from-home was smoother than anticipated, industries across the globe faced a major set-back and were forced to lay off employees or deduct a percentage of the salaries of their workforce to be able to survive the pandemic.

This is when the pandemic slowly began to influence the global investments industry.

Many existing and novice investors began to research and scan the markets for companies that were performing better and had chances of growth and survival during the pandemic.

In March and April, as most of the world shut-down, markets sunk to new lows and when they recovered they did so with extreme volatility. People were conserving more cash, spending less, and investing much more than ever before.

While governments around the world tried to reduce the burden of fixed expenses like loans and interest for the people, general living expenses shot up due to the unavailability of basic necessities at the local marketplaces.

This, interestingly, resulted in greater demand for eCommerce, and companies like Amazon and Shopify had to hire more people in order to meet the increased demand for delivery and logistics personnel.

This pushed up the investor confidence leading to better performance of these companies in the US markets by 50-100%. Similarly, a huge interest was seen in the Technology, cloud computing, and video conferencing stocks (like Zoom, Microsoft, Google, Apple Inc.) due to the shift of the workplace model from physical to remote working.

With endless time being spent at home millennials and Gen Ys began to spend a considerable amount of their time on social media, gaming apps, food delivery, and home workout equipment. On cue, stocks of social media and gaming companies.

The volatility in oil and the emergence of interesting battery and energy tech has led to EV stocks and Oil & Energy ETFs reach new highs as well. Tesla is arguably the most traded scrip in the US.

Overall, it was observed that Indian investors were trading more than US$ 25million every month during July-Sept in comparison to only US$10 million per month in the first quarter of 2020.

Fast forward to October - as economies began to show signs of recovery, Indian investors further expanded their portfolio by adding Airline stocks, ADRs like Alibaba, NIO, and JD.com to the consistently growing technology stocks.

All of them grew 75-100% in 2020. Fluctuations in the price of the dollar due to US elections and anticipated weakening of the US Dollar coupled with the Indian household traditions also saw that investments in Gold ETFs continued to surge.

As the year came to an end and now as 2021 unfolds with a new US President in power, we expect

• The Health & Pharma sector to farewell with an anticipated growth of 10-15% in Jan-March 2021 due to vaccine announcements

• Increased focus on climate change as Biden seeks to boost renewable energy, should lead to continued growth in EV and energy stocks

• Big Tech companies will continue to rise 20-30% through the year due to long-term prospects of growth in their business and how well diversified their revenue-channels have become

• Hospitality, airline, and travel will bounce back as the economies of the world open their gates for tourists after the vaccines come out. Look out for “revenge travel”.

The US market, overall, has been a great performer over the last decade and has, especially, done much better than India in the last 5 years. Giving a CAGR of over 10 percent against 6.5 percent in India.

With technology companies and tech-related themes likely to lead the world in this new decade, it would be remiss to ignore the US investing in your portfolio strategy.

(The author is Co-Founder & Co-CEO, Stockal Inc.)

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