What will our investment landscape look like post-COVID-19?

If there’s one good thing to come out of the unprecedented global pandemic that is COVID-19, it’s that referencing the timeline of our lives has become a lot simpler. Anything that happened before it took its stronghold and sent us, at large, into lockdown will be referred to as ‘BC’ (before COVID) and after we emerge from its grips, we will speak animatedly about ‘PC’ (post COVID) as we regale audiences with our survival stories.

Since it all began, the financial world has been heavily pontificating about the effect the pandemic will have on the investment landscape. So as well as being able to set that all-important demarcation line between BC and PC, there may be some exciting investment trends on the horizon as well.

Of course, the online economy has been booming and naturally people are turning to healthcare as a viable investment option, but what’s the next big thing we can expect post pandemic for savvy investors to sink their teeth into?

Post-pandemic mega trends

The world is currently undergoing a major restructure and as such, is reforming its ways of working. Coronavirus has impacted everything from the economy to the environment and penultimately created a tidal wave of trends which are now beginning to emerge from the rubble of its initial blow.

Healthcare and biotech are certain to be big winners in the COVID rally, but a new generation of investors is stirring beneath the surface and demanding the opportunity to pledge financial allegiance to companies which exhibit the following traits:

  • A social conscious
  • Support sustainable futures.

Enter the impact investor.

Many investors will be looking at how they can contribute to the global recovery and seeking to understand their impact across a range of sectors and issues for the long term.

The good news is, there are plenty of businesses in Australia and globally which are helping to build a better world for the future, so investors will be spoiled for choice.

The advantage of impact investments is that they provide investors with a diverse range of options for them to direct their capital into, that will not only make a financial return, but align with their values. Also, impact investing will play a critical role in forging a positive return for our economic growth PC.

ESG – Investing in a more sustainable future

ESG stands for Environmental, Social, and Governance but the term is often used interchangeably with sustainable investing and socially responsible investing.

Whatever it’s referred to it as, this investment strategy of applying non-financial factors as part of the financial decision-making process is hitting record levels around the globe and according to a Macquarie Wealth Management report, businesses may just need to get on board to survive.

Macquarie’s May 2020 Investment Update indicates two ESG themes emerging in a post COVID-19 world:

  1. A developing expectation that businesses prioritise social responsibility over excess profits – The human impact of this crisis has left the focus very much on social issues such as employee health and safety, working conditions and cost management through layoffs.
  2. A change in societal demand for certain products and services – This emerging demand is providing businesses the opportunity to thrive through offering beneficial and sustainably focussed solutions to problems arising from the pandemic.

The demand is coming across three areas:

  • Consumer: Changing behaviours like working from home and social distancing are encouraging rapid take-up of new communications technology.
  • Business: Onshoring and de-risking of supply chains is creating a need for efficiency gains and providing the opportunity to incorporate environmentally friendly sourcing and processes.
  • Government: Government demand for technology to manage social distancing and public health.

As far as being a trend goes, impact-dedicated funds still account for less than one percent of global investment, so it’s definitely still in its infancy. Perhaps a mini trend at this stage, but momentum is certainly building.

Safe as houses

The property market has faced some challenges during this tough economic period. But it’s important to remember that property has historically proved to be a stable investment during similar economic periods.

Market insights show that Australia’s fundamentals in a PC world will remain strong, compared with the rest of the world, but investors need to understand the emerging trends before they jump back into the market.

Here are some things to consider:

  • As always, do your research prior to purchase. Check out the developer and builder’s track record and reputation.
  • Location, location, location – it’s still a vital piece of the property market so go with what will stand the test of time.
  • Some new drivers have emerged in buyer behaviour since the pandemic. These include an increase in demand for a specific design, communal facilities, lifestyle elements within communities, flexible spaces, green and outdoor spaces, proximity to amenities and access to infrastructure are still high on the list.

The property market is very resilient, but the same rules apply for investing PC as they did BC.

Digital 2020

Staying connected has been the theme of 2020 and technology has been the protagonist of this global show.

There is a likelihood that Exchange Traded Funds (EFTs) will thrive, with the instigation of some on-trend investment themes for those interested in biotech, robotics and cybersecurity.

EFTs have already become a popular option for the digitally connected millennial generation and they’re ability to track a variety of markets, including gold and foreign exchange, gives investors exposure to a broad range of themes. Plus, they’re low cost, which is great for smaller investors and those with self-managed super funds. Also, they give instant diversification to a portfolio.

Which brings us to our wrap up…

Diversification, diversification, diversification

Experts can’t say it enough. A diversified investment portfolio is key for long-term success – BC or PC.

If you’re considering becoming an investor or ramping up your sharemarket portfolio, continue to look to the long term and make sure you have a good mix of Australian and global-listed shared, high-grade corporate and government bonds as well as gold, which tends to perform well when times are tough.

Avoid the hype that these major global events can tend to bring about. Investing in market trends can produce good returns in the short term, but if you delve a little into modern market history, you’ll find examples of some which have not quite hit the mark and left their investors short.

In any case, speak to your financial advisor if you’re unsure.