Investment Themes 2020
Post COVID-19
5 of our investment themes 2020 confirm their potential
Focus on a medium term approach
In March, the lock-down of almost half the world's population precipitated the global economy into an unprecedented recession. Global stock markets fell 34% in 30 days. Although they bounced back strongly after the announcement of government measures (gradual exit from lock-down and economic stimulus policies), the short term environment remains uncertain. It is possible that equity markets will again test recent lows: the end of lock-downs will likely see an isolated and temporary outbreaks of the virus. The challenges to implementing economic policies, the impact of ‘de-globalisation’ and renewed trade tensions between the United States and China are likely to see episodes of increased volatility.
As a result, our central medium term economic scenario involves a gradual recovery in the second half of the year, continuing into next year (a U shaped recovery).
Some markets will benefit from an attractive valuation. Beyond short term fluctuations in prices, it is important to look for opportunities to increase equity positions in the event of a fall in price. In this context, a thematic approach should enable greater selectivity.
Covid-19 virus crisis amplifies some trends
Structural trends now seem to be essential. The first is the search for yield in an environment of interest rates and bond yields that are likely to remain very low, for a long time to come. The expected returns on good quality bonds are now close to zero and investors are likely to move to other asset classes, while limiting risk taking... Beyond this transition from the bond market to defensive stocks or alternative investments, some changes in the economy are also likely to generate more specific opportunities in equity markets over the medium term.
Our 2 investment themes with defensive orientation:
Theme 01 - High quality stocks
We must now favour companies which exhibit high profitability, limited debt, low variability of profits and large cash reserves.
Theme 02 - Defensive solutions
The trend is to search for alternative returns via good quality corporate bonds, hedge funds and structured products.
Our 3 investment themes with a dynamic orientation:
Theme 03 - De-globalisation
Protectionist trends and dependence on international supply chains are expected to lead a stabilisation and even a decline in international trade in the long term. This ‘deglobalisation’ should provide opportunities for some companies or even for some countries. In particular, import substituting goods and services are well positioned to benefit from this trend. The same is true for emerging market countries which compete with China.
Theme 04 - Digitalisation and technological innovations
Alongside the trends in Healthcare, this is one of the most marked trends: 5G and Artificial Intelligence will benefit from the increased communication and data needs generated by the crisis.
Theme 05 - Innovation in health care
This sector is growing faster than the rest of the economy. Thanks to digitalisation, data analytics, artificial intelligence, healthcare provision will change considerably at all levels and generate a wave of public investment.