A global funds management house has cautioned investors not to ignore the global trends witnessed during the height of the COVID-19 pandemic as they look to take advantage of the strong performance stock markets have exhibited over the past few weeks.
To this end, JP Morgan Asset Management international equities group investment specialist Nicholas Wilcox reminded investors to think back to the societal changes, such as working from home, that were dominating discussions as recently as a few months ago.
“I think this is a point that has been slightly forgotten in the enthusiasm that we’ve seen from markets over the past few weeks,” Wilcox noted.
“A lot of the trends that manifested themselves mid-pandemic are not going to go away. We’re not going to suddenly see a step back in digitalisation. E-commerce is unlikely to return to the lower levels that we saw a year ago.
“So yes we’re right to start focusing on some of those recovery plays, but at the same time we need to be cognisant of the fact that we are in a world that has changed and that change is highly likely to remain and, in many instances, continue to accelerate as we move through the next few years.”
With regard to the current recovery in markets, he was confident this will continue in the immediate to short term.
“We will expect a significant earnings pick-up throughout the rest of this year and then, more reassuringly, it will continue through 2022 as well,” he predicted.
However, he warned there will be a divergence in the way those improved earnings will be delivered.
This means the recovery will, in the main, exhibit a logical path whereby the geographic regions most affected by the COVID-19 pandemic will also experience the largest pick-up in earnings over the coming year, but will still present situations of which investors will need to be wary, he observed.
“Typically that would lead to Europe, for example. However, [if] you look at mobility data today, and while most of the world is reopening post-pandemic, Europe is a definite laggard in that respect. In fact in many of Europe’s largest countries things are moving the other way, [with] France, Germany, and Italy all imposing quite significant lockdowns in recent days,” he said.
“So we can’t just blindly follow these earnings numbers, but for the most part they are going to be supportive of markets moving forward.”''