The resources, technology and travel sectors are likely to lead the financial market recovery after the deceleration of new cases of COVID-19, an investment expert has said.
“Resources are likely to have one of the quickest rebounds post COVID-19,” Fidelity Australian Equities Fund portfolio manager Paul Taylor said in an update on the firm’s website.
“[It is] currently the cheapest sector – balance sheets are strong, cash flows are still reasonable and the sector has been significantly negatively impacted leading into COVID-19.
“Once we see a plateauing in new cases, I think we’ll see money re-enter the sector very quickly, given its value, and especially if we see China undertake fiscal stimulus.”
Taylor also noted the technology sector was likely to perform well once the number of new coronavirus cases began to decelerate, despite performing poorly in recent times.
“Technology could lead the market post COVID-19, given the sector now has much better valuations, long-term fundamentals and structural growth,” he said.
According to Taylor travel would also improve despite being one of the sectors worst hit by the coronavirus, but was likely to remain volatile for a longer period owing to a more prolonged recovery compared to other sectors.
The consumer staples, healthcare and real estate sectors were likely to be strong performers as well, he pointed out
“Consumer staples (in particular, supermarkets) currently have strong fundamentals and given Kaufland’s decision not to enter the Australian market and food inflation potentially entering the system, we believe these strong fundamentals will likely continue, even post COVID-19,” Taylor said.
“Similarly, healthcare is very well positioned for the long term, as is real estate, given the likely continuation of very low interest and capitalisation rates.”
He reminded investors financial crises could potentially provide good opportunities to upgrade their portfolios.
“Typically, at the start of a crisis, the markets sell off indiscriminately – shooting first and asking questions later, so to speak,” Taylor explained.
“So if there is a company you’ve always wanted to own, but it has always looked too expensive, this could be your opportunity to buy a high-quality company with strong long-term fundamentals at much more attractive valuation levels.”