COVID-19 has changed the landscape of the world, particularly with regard to the global economy. Markets have experienced unprecedented volatility, and investors are looking for signs and signals to determine next steps for their investments.
Although it’s impossible to predict the financial future—especially as the pandemic is still taking its toll on different countries and regions—there are some investment trends that could emerge amid COVID-19. Here’s what investors may want to keep an eye on in the coming months.
In many ways, COVID-19 has shed light on the importance of certain sectors of business—including some that may not have gotten their due before the coronavirus. Many of these sectors have drawn attention from investors, and may pick up steam as a result of the pandemic, especially as we see the broad effects of the virus with time.
Healthcare and pharmaceuticals
R&D in healthcare and pharmaceutical companies is in turbo drive. Health-sector companies are racing to find a vaccine for the novel coronavirus, securing distribution channels to get any prospective vaccine to market, and also thinking about shoring up healthcare systems in advance of a second wave of the pandemic. Plus, it’s likely that other pandemics may occur in an increasingly interconnected global economy. This means more research, development, and innovation across this sector, which could have an impact on the value of the industry.
Remote work has soared during the pandemic, mostly out of necessity. But the modern workplace is primed to change in the wake of COVID-19; not only will offices look different, but company organizational structures may also change as employees continue to work from home. Companies that create productivity tools such as centralized communication apps, video conferencing, workflow tools, and more may benefit from these changes. There will be a race to provide the best user experience, compliant solutions for regulated businesses, and enterprise-level platforms to accommodate the needs of a more distributed workforce.
Wellness—a category that encompasses physical, social, and mental health—may experience an upward swing in the wake of COVID-19. Consumers are utilizing apps and other streaming fitness services at record numbers, and others are seeking out support through video-health appointments and text messages with doctors. If these behaviors continue to trend even after the impact of the coronavirus pandemic has lessened, there could be increased value in this sector.
Consumers have discovered, more than ever, that what they want can come to them. Tech-enabled courier services tailored toward goods such as food have accelerated amid the pandemic. Direct-to-consumer brands are particularly well positioned to offer a safer, more convenient shopping experience as well. On the other side of the crisis, customers may find that they’re less interested in going into stores to get what they want, which could be a value-driver for these on-demand providers.
It hasn’t been possible to go to a movie theater, attend a sporting event, or see a performance in person during the pandemic. And even as lockdown rules begin to ease, these live events haven’t resumed, or those that have have done so without spectators. Moviegoers may be less inclined to see the next summer blockbuster in theaters for the foreseeable future as well. As a result, streaming traffic for entertainment services has reached all-time highs during the pandemic, which could signal a trend in how people consume entertainment in the future.
Expect more entertainment companies to release films directly to streaming services, or to purchase on demand, as interest in attending crowded theaters declines.
Trends suggest that investors may move toward more conservative financial products for their portfolio in the wake of a volatile market and uncertain economy. These include passively managed funds such as ETFs and index funds as well as passive income sources such as bonds, real estate investing, and farmland investing.
Although these may not create outsized gains overnight, the appetite for buying individual stocks and riskier financial products has waned as the market dipped. More conservative investments can help stabilize portfolios—especially amid financial uncertainty, predicted unemployment rates, and a potentially protracted bear market.
Amid market volatility during the coronavirus pandemic, many stocks have seen their prices dip lower than they have in a while—including Blue Chip stocks, which are often prohibitively expensive for some investors.
It’s difficult to tell whether or not we’ll see a prolonged bear market, and hard to know how long these stocks will experience lower-than-normal prices. Still, investors should keep an eye out for the share cost of these marquee players. There may be an opportunity to purchase these stocks without paying the usual premium, which could set up investors to reap dividends during periods of market recovery.
Although the future of commercial real estate is in question due to a potential shift to a larger remote workforce, personal real estate could be trending in a different direction. As such, it may be prudent to keep eyes on personal investments in real estate.
With mortgage rates at some of the lowest benchmarks in history, those who have the liquidity for down payments on homes may be looking to seize the moment to invest in property. Experts expect urban dwellers to reconsider their choice to live in cities, which may provide a jolt to real estate markets in suburbs. The prospect of more remote working may also lead to a hotter market in areas further than commuting distance to the nearest metropolitan area. Additionally, low interest rates could also mean a spike in refinancing. Real estate crowdfunding, which has become popular in recent years, could become an even bigger player in property investing, too.
This could open up new opportunities for investors, whether that’s to invest in real estate directly, or closely watch companies and stocks that serve the housing market. This is especially true of real-estate technology companies, as startups shake up the landscape for both ways to invest in real estate and the process of buying homes.
Actively managed investments, and those tied into the performance of a volatile stock market, may fall out of favor with some investors in the near future. Looking into alternative asset classes could become an appealing trend as investors look to generate value from sources beyond Wall Street.
Real-asset investing, commodities investing, real-estate investing, and more could become appealing due to potentially lower volatility as well as the ability to generate passive income amid a bear market. Additionally, new sectors for direct investing are emerging, such as farmland investing and academic-research investing. Some of these alternative asset classes provide stable returns, while others are long-term investments that are meant to pay dividends several years down the road.
The results of COVID-19 are still unfolding as the global crisis continues, and long-term impacts of the pandemic remain to be seen. As a result, investor behavior is well primed to evolve in the coming months—and years, too. There’s a strong chance that investors will move further from investments and asset classes that are tied to market movement, especially with an uncertain economic future. And, although it’s important to keep their eye on market fluctuations due to potential opportunities in emerging sectors and falling Blue Chip stock prices, more stable investments and alternative asset classes have the potential to become increasingly attractive.
Particularly, farmland investing has emerged as a relatively stable and safe investment among alternative asset classes. Not only does it generate strong, consistent returns, but it also helps make a difference.
Disclaimer: FarmTogether is not a registered broker-dealer, investment adviser or investment manager. FarmTogether does not provide tax, legal or investment advice. This material has been prepared for informational and educational purposes only. You should consult your own tax, legal and investment advisors before engaging in any transaction.