Please see below articles received yesterday afternoon, written by the Head of Sustainable Investing at Jupiter and Head of Strategy at UK Alpha. The first commentary offers tips on investment opportunities for the year ahead and the second provides an update on the UK’s economic recovery.
Abbie Llewellyn-Waters, Head of Sustainable Investing, noted that in recent months the largest impact on sustainable investing, including her own strategy, was the value rotation. Abbie believes that the most attractive sustainability investment opportunities are to be found in high quality stocks. Reporting season is starting soon, and that will provide more context about how these quality stocks are navigating this environment.
From a broader perspective, Abbie doesn’t share the optimism in the market based on an economic reopening, which has been in full swing since the first vaccine announcements in November last year. She’s concerned that a normalisation is further away than the market is currently pricing in. In recent discussions with a world-leading company in the field of viral vaccines, they pointed to more prolonged timeframes, with normalisation closer to years rather than months away.
As such, Abbie believes it is important for investors to be disciplined and focused on businesses that can survive and prosper through this period and into the longer term, especially in defensive sectors such as healthcare and consumer goods. Among the more cyclical parts of the market, Abbie continues to see strong sustainable investing opportunities within the digitalisation theme.
Fundamentally, however, Abbie sees sustainable investing as a structural theme and many of the drivers that emerged in 2020 (including addressing climate change, where Biden’s appointment of John Kerry as special climate envoy shouldn’t be underestimated, in her view) will continue throughout 2021 and beyond.
Market whipsaws as recovery optimism weakens
At the start of the year, the market trusted in the post-vaccine recovery trade and expected that by the summer the economy would be getting back to normal, noted Richard Buxton, Head of Strategy, UK Alpha. That view has been undermined by a complicated pandemic with new virus variants and data suggesting some people are reluctant to be vaccinated, he said.
Now the market is whipsawing daily, he said. He cited a company that operates concessions in airports and train stations that said two weeks ago it was expecting a strong summer of trading as consumers rush back to travel after the lockdown. That outlook now seems overly optimistic, he said, noting that testing requirements would complicate a family of four’s holiday to Spain, for example.
Richard said he is following closely the debate about reopening UK schools. The government will be forced to make a political judgement about when to ease the lockdown and let students return to the classroom in order to end potential long-term damage to young people, especially those in disadvantaged areas, whose education has been disrupted, he said.
While a return to normal will take longer, it makes sense on a 2-year view to invest in companies that will benefit from the economy reopening, Richard said. In the meantime, his investment team is looking at adding to defensive holdings, such as including pharmaceutical companies, he said.
The recovery will happen, but like in comedy, it’s all about the timing, Richard said.
It will be interesting to see where opportunity presents itself as we make positive strides to achieve mass vaccination in the UK and worldwide.
Stay safe.
Chloe
29/01/2021