5 financial market trends to keep an eye on in 2021

Entering the new year, we asked our Ceo, Nick Bortot, to list five financial market trends he thinks we will witness in 2021. Here’s what he told us.

1. Covid-19 will play a huge role again

Covid-19 will still be one of the major players in 2021. It all depends on how quickly the vaccines will be distributed and how well they work. Still, as we have seen with the Covid-19 mutation in Great Britain at the end of 2020, the virus is not predictable.

Winners next year will be vaccine makers like Pfizer or Moderna. Unfortunately, Sanofi’s and GlaxoSmithKline’s vaccines won’t be ready until late 2021 because they need to improve the shot’s effectiveness in older people. However, one should be cautious about vaccine producers in the long run, as there are already dozens of companies working on a vaccine. At some point, there will be an oversupply.

There are also less apparent companies that could profit: Just one example, distributing the vaccine will require enormous logistics efforts which will be taken care of, for example, by Deutsche Post DHL, Bolloré Logistics, Lufthansa Cargo or cold storage companies like Va-Q-Tec. Many logistics companies have already benefited from the online shopping boom due to the pandemic and could get another boost by this.

Sectors that got a heavy beating in 2020 could surge: If people are allowed to travel again, travel companies like TUI and Carnival, hospitality companies like Accor, and airlines such as Air France-KLM, Easyjet and Lufthansa, could get a boost.

Another sector that could have some interesting times ahead is commercial real estate. As for the office real estate, the question is to what extent working from home will remain in place. If companies need less space, this could have a negative impact on companies such as Alstria Office and the like, although they mostly have long-term leases and might feel it at a later stage. As for shopping malls, with players like Simon Property or Unibail-Rodamco-Westfield, they could suffer again from missed rent payments and potential tenant bankruptcies because not all companies will survive the pandemic.

2. Return of the dividends

All in all, if the global economy continues its recovery as forecast – e.g. Deutsche Bank expects the global gross domestic product (GDP) to rise by 5.2 percent in 2021- the global stock markets should benefit. Analysts of Deutsche Bank expect that corporate earnings expectations for 2021 in the USA are up 23 percent year-on-year, while in Europe the figure is 40 percent. Watch out especially for the second and third quarters.

2020 was not a good year for dividend investors, as many companies cut their dividends because of the pandemic. In 2021, dividends are expected to rise again. As central bank interest rates are expected to remain at 0% for a long time, this makes dividend stocks even more attractive for investors in 2021.

3. A boost for green companies

With Joe Biden, there will be a paradigm shift in the White House. The new US president will give environmental companies a boost as Biden will turn away from fossil fuels toward more climate protection and renewable energies. This is likely to benefit shares and ETFs that meet the so-called ESG criteria (environment, social, governance) and pay attention to environmental and social standards.

Note that we also have some European elections next year, e.g. in Germany. Angela Merkel will not be available for reelection and the German Green party could be one of the big winners. That would also have a strong impact on stocks related to energy and environmental change. This is indeed a topic to keep an eye on as the European Union also recently decided to intensify its efforts against global climate change.

4. Women level the playing field in investing

It is still a fact that most stock market investors are male. But according to the FT, female investors are now signing up to investment platforms at faster rates than men. At BUX Zero we also saw that the signing up of women grew six-fold over the year to date, compared with a fourfold growth for male investors. I believe women will keep playing a greater role in investing next year.

On a related topic, you can now invest in products focused on gender equality, for example, the Lyxor Global Gender Equality ETF and the MSCI Japan Empowering Women Index. Financial products like these could further generate interest among investors concerned with ESG criteria.

5. Red flag for FANG?

2020 was a good year for techs. But the FANG stocks, i.e. Facebook, Amazon.com, Netflix and Alphabet are overvalued now in my opinion, and are facing more lawsuits. Several US states have for example filed antitrust lawsuits against Google and the US government also filed an antitrust suit against Facebook and would love to break up the corporation.

One thing we know for sure: It’s going to be an exciting year on the financial markets again with lots of movements and opportunities.
All views, opinions, and analyses in this article should not be read as personal investment advice and individual investors should make their own decisions or seek independent advice. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication.