Our first Experts In-House event of 2021 explored how the aftershocks from COVID-19 could affect the economic, social and investment outlook for the year ahead.

Christian Nolting, our Global Chief Investment Officer, offered a global perspective on the post-pandemic landscape during sessions with Tuan Huynh, Chief Investment Officer for Europe and Asia, and Deepak Puri, Chief Investment Officer for the Americas, held on January 19, 2021.


“It will take a while to fully grasp the enormity of what we’ve just been through. But there are a confluence of forces creating a new world order that we can use to build an initial framework for investing.” These words from Puri kicked off a fruitful discussion on one of the key questions of the moment: how might investors position themselves for the year ahead?


The expert speakers expanded on the topics identified in our recent CIO Outlook report for 2021, ‘Tectonic shifts: Looking beyond COVID-19’, and examined the global and local investment themes beginning to emerge as we start to look beyond COVID-19.

A look back at 2020: from red to recovery

Nolting began by reflecting on 2020 and how in March, as the pandemic took hold, the markets experienced their biggest drop since 1987, falling as low as -12% on one day. And yet, the year finished very differently, with many asset classes performing positively and only a few commodities remaining in the red. As Nolting reflected, “If you were an astronaut in orbit, watching the pandemic take hold, you would be very surprised when you landed back on earth at the end of the year.”

E-commerce, healthcare and smart mobility: the new investment frontiers

Moving on to 2021, Tuan Huynh looked at the investment opportunities that have arisen as a result of the COVID-19 crisis and the way it has impacted our lives – starting with e-commerce, which is now at an all-time high. Demand for fast internet connections has made 5G mobile technology a compelling investment theme, while the rise in digital crime has boosted interest in the cybersecurity sector. As vaccination programmes take effect and people venture onto the high street once again, this growth is likely to slow slightly, but not reverse.


Once the pandemic is dealt with, the healthcare sector will be able to turn its attention back to other conditions and services, leading to interesting investment opportunities. And “smart mobility” will also become increasingly relevant, Huynh suggested, as we all change the way we travel and commute.

Is massive stimulus skewing the market?

In our afternoon session, Puri explored the major impact COVID-19 has had on the labour markets, the scale of the relief packages the U.S. Congress is putting together, and why these are creating a disconnect between the stock market and the real economy. 


Globally, almost 500 million full-time jobs were estimated to have been lost by the end of the first half of 2020.[1] “With that kind of pain in the employment sector, the governments have to step in and be the bridge towards this post-pandemic normalcy,” he said.


In the U.S., net job losses for 2020 were 9.37 million,[2] and Congress has responded by introducing five COVID relief packages – including a potential $1.9 trillion fiscal package, the America Rescue Plan. This latest proposal would raise the total amount of fiscal stimulus to 25% of GDP.


This, Puri concluded, is one of the main reasons why we’re seeing a disconnect between the real economy and the stock market. “You’re already looking at levels of fiscal stimulus that are unheard of.”

A hard landing for the aviation industry

There have been big winners and losers over the past year, and aviation has been one of the areas worst hit. Coupled with the impact of ESG, Huynh argued it is unlikely the aviation sector will ever be able to bounce back to pre-COVID levels.


By contrast, technology has become increasingly prevalent in our lives, with the major tech companies performing very well over the past 12 months. This has resulted in the soaring value of intangible assets in the S&P 500. To put this into context, in 2005 the value of intangible assets in the S&P 500 was over $9 trillion. Whereas in 2020, intangible assets were worth more than $21 trillion.[3]


Puri also touched on a similar theme, reminding clients, “When you buy S&P 500 today, you are really buying a little bit of a growth tilt to a core allocation.”

A barbell approach to 2021

A financial safety net is all well and good, but Puri pointed out that state support has its limitations for corporations. The Fed funds rate remains almost at zero and many companies, along with the fiscal stimulus, are getting used to this level of support. “It will be very interesting to see how many of these companies can remain profitable in a post-pandemic environment with that kind of multiple.”


So what should investors do in this environment? Puri argued that the key is keeping quality of earnings in mind. In particular, when investing in equities, looking at companies clearly demonstrating sustainable operating earnings.


He added that cyclicals have started to perform better, and industries like construction and materials are beginning to do really well after getting beaten up during the worst of the pandemic.


“So, a bit of a barbell approach might be suitable for some clients as we navigate this very challenging environment” Puri said. “And, if your allocation is core U.S. equities, I think it may warrant another look at other parts of the world to see if there might be better risk-reward [ratio] elsewhere.”

A diverging world: Asia, Europe and the U.S.

For the final part of the talk, Nolting took a closer look at the leaders and laggards of the new world order, in terms of both categories and countries.


It is no surprise to see massive growth and faster economic recovery in Asia. In contrast, in Europe and Japan not so much recovery is expected. “But,” as Nolting explained, “there’s more room to grow and this could present some nice opportunities as well.”


When it comes to growth and the opening of the economy, Nolting also argued the U.S. is in a good position now they have started their vaccination program. We have also seen yields moving higher this year. “So if you look at our forecast for the second half of the year, we think the U.S. economy could do quite well.”


After a year of extreme market conditions, it was encouraging to hear all three speakers offer a more positive outlook for the year ahead. As Nolting concluded, “I think the best way to invest this year is to build your own strategic asset allocation and then look at the themes which have been impacted.”



To read our CIO Annual Outlook for 2021 (December, 2020), please click here.


More information

Christian Nolting and his team will be monitoring developments closely. For the latest publications from our Chief Investment Office, visit our CIO Perspectives page:


ILO Monitor: COVID-19 and the world of work. Fifth edition, ILO, June 30, 2020.
Ocean Tomo Intellectual Capital Equity and IP CloseUp.

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