Many investors are asking themselves: Is it business as usual on the stock markets or are the fat years over? What has the Covid-19 pandemic done to the markets, and what's next for the government's flood of money? Here are 5 theses for orientation in a volatile environment.
#1 Covid-19 will not only keep us busy, but will also surprise us.
After Christmas 2020 brought us a very special gift in the form of a vaccine, Covid-19 and the associated implications and questions remain central to stock market performance this year. The largest mass vaccination in human history has begun, but many key questions surrounding the coronavirus are still unanswered: What exactly are the mutations all about and how will they develop? Do children, who will probably have to wait a long time for a vaccination, transmit the virus in the same way as adults? How high is the willingness of the population to be vaccinated voluntarily and can this really curb the further spread of Covid-19?
The potential for surprises therefore remains high. This has an impact on market volatility, which will be correspondingly higher at times.
#2 Central banks and governments can still be relied upon.
Last year, we saw global monetary and fiscal policy measures that were historically unprecedented. Measures that were previously practically unthinkable suddenly became reality. Central banks can also be expected to continue their extremely expansionary policies in 2021. Fiscal policy support is also likely to continue. This scenario is fundamentally positive for equities.
Active management and risk control remain very important in a volatile environment. We have used our experience from 2020 to further refine and optimize our hedging models accordingly. We remain fundamentally true to our focus on innovative quality companies in sectors with structural growth trends. We will give greater weighting to shares in smaller quality companies that stand out with innovative products. These may well be companies in cyclical sectors that will benefit most from the recovery of the global economy in the short term. We look forward to supporting you again this year with our expertise, commitment and passion for investing.
Jules Kappeler, CEO
#3 The global economy is picking up strongly, led by China.
Thanks to increasing control over Covid-19 and continued strong fiscal and monetary policy measures, the global economy is gaining momentum. Shares of quality companies in cyclical sectors are likely to perform well in the wake of a global recovery in economic activity.
And as far as China is concerned, it will be particularly interesting to see how the new Democratic President Biden will continue or reshape the policy of his predecessor. The positions of the Democrats and Republicans have so far been very similar when it comes to China policy – unlike in practically all other areas.
#4 Megatrends such as digitalization have been reinforced by corona and will not flatten out even after corona.
The coronavirus crisis has led to an unprecedented surge in innovation in many sectors and has changed consumer behavior accordingly. These developments will not be reversed, but will continue. Companies that have not reacted quickly and invested in innovation will fall by the wayside. 'The fast eat the slow…'
Shares in innovative companies in sectors with structural growth trends will continue to be attractive in the future. However, these do not necessarily have to be the big players: it is the fast movers that have an advantage, and these can also be smaller companies.
#5 TINA – There Is No Alternative: Shares are a must.
Of course, investing in shares is not entirely without alternative – but it remains a clear must. Equities are by far the most attractive investment for sustainable, long-term wealth accumulation. Innovation will continue to create growth and form the basis for positive performance for shareholders of innovative companies.
By Jules Kappeler
CEO of Point Capital Group
7. January 2021
