The global COVID-19 vaccination rate will have a bigger impact on economic and market recovery than fiscal and monetary policies, an investment expert has said.
American Century Investments vice president and senior portfolio manager Brent Puff said while factors such as United States President Joe Biden’s corporate tax policy were likely to be a continued source of concern for investors and affect the performance of technology and healthcare companies in particular, the rate at which the COVID-19 vaccination is rolled out will have a far greater impact on global markets in 2021 than economic policies.
“The likelihood of more taxes is by no means immaterial in our investment decision-making, but the speed at which the global vaccination rollout continues will underpin markets for the remainder of this year,” Puff said during a recent webinar.
“Tax changes will, however, play a role in how some particular sectors progress. President Biden has indicated he wants to make it more difficult for corporates to shelter profits in low-tax jurisdictions.
“If tax rates go up, it will slow down the progression of corporate profits and healthcare and tech are the most vulnerable. The market will have to adjust to that reality over time.”
During the webinar, American Century Investments vice president and senior portfolio manager Trevor Gurwich pointed out companies involved in renewable energy supply that were likely to benefit from government initiatives to cut carbon dioxide emissions would also attract investment during 2021 and beyond.
“The US government, for example, has green energy initiatives which include incentives and regulations for energy-saving measures which have impacted building codes and efficiency standards. The trend towards electrification and lighter parts within the auto sector is also closely tied to these trends and is a space we are watching,” Gurwich said.
“Importantly, the Biden administration is unlikely to change any of the policies relating to renewable projects as they tend to be quite cost-competitive. Investments in energy efficiency will continue to increase and it’ll be a key theme of 2021.”
In October, JP Morgan head of the fixed income, currency and commodities group Robert Michele expressed support for portfolio allocations to corporate and high-yield bonds in light of government and central bank economic responses to the COVID-19 pandemic.
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