Investors are considering the role of bonds, Tech and ESG after a chaotic year

Photographer: Michael Nagle / Bloomberg

This has been a year like no other.

Beaten by the unprecedented health crisis, global stocks fell into bear market at recorded speed, and then accumulated to new heights as a result of a flood of central bank money. Bond yields were thinned to low levels and world reserves did not rise to high levels, only to then return to the weakest level in more than two years by the end of 2020.

Global asset distributors from BlackRock Inc. to JPMorgan Asset Management have outlined their takeaways for investors from the volatile year. Here are some of their reflections:

Role of Rethink Bands in bundles

As a result of the strong stimulus given by global policymakers when markets were seized in March, there has been one breakdown in the long-standing relationship between equities and bonds. U.S. Treasury 10-year yields rose from 0.3% to 1% within a week, while equity markets continued to fall.

Now, as investors resist lower rates for even longer as growth picks up, doubts arise as to whether developed market government bonds can continue to provide both. its protection and diversification as well as diversified investors seeking income gains. There is also a debate the traditional investment policy of investing 60% in stocks and 40% in bonds, even if the strategy proved to be stable throughout the year.

“We expect fiscal stimulus to be more active than any other modern moment in history in the next economic cycle, as monetary and fiscal policy aligns,” said Peter Malone, portfolio manager at JPMorgan Asset’s ioma-asset solutions team in London. “Future yields from a simple, stable stock bond package are likely to be constrained.”

Some Wall Street giants encourage investors to take a risk-taking stance to adjust as bonds fluctuate. Among them, BlackRock Investment Institute advised investors to turn to high-yield equities and bonds, according to a note released in early December.

‘Don’t oppose the food’

Few would have expected a rapid turnaround in markets we saw in 2020. As Covid-19 released, the S&P 500 Index fell 30% in just four weeks early in the year, it plunged far faster than the mid-and-a-half year it took to get to a bottom in previous bear markets.

Then, as governments and central banks built economies of liquidity, stock prices went back at an equally astonishing pace. In about two weeks, the U.S. benchmark rose 20% from the March 23 low.

“You usually get more time to set your portfolio in correction,” said Mumbai-based Mahesh Patil, co-chief investment officer at Aditya Birla Sun Life AMC Ltd. With markets moving so fast, someone in money would be “caught catching this rally and it would have been hard to catch.”

With a little contrarian help, Patil said, adding that it is better for investors not to take too many calls to sit on money. They should also focus on a pack from the bottom up so they can go through each round up and down, he said.

SooHai Lim, head of Asia Equities in China at Barings, said the rapid recovery of the market was a testament to the strength of the old adage “Don’t fight the Fed. ”

That said, some fund managers have warned that investors should not quickly support central banks as they are sure.

“It was a flip of coins from there and they were stepping in early enough,” said John Roe, chief executive. ioma-fund holders of Legal & General Investment Management in London. “The consequences could be unprecedented. ”

Teflon Tech

This year’s rally rally in tech stocks gave investors a lifetime opportunity. Anyone who missed out on this topic that benefited greatly from staying at home and digitization trends in the pandemic would seem to be declining. The top ten U.S. companies that contributed the most to the S&P 500 Index this year are all technology-related stocks, ranging from pioneer of cloud computing Amazon.com Inc to chip maker NVIDIA Corp.

It’s all Tech

These stocks have added significantly to the S&P 500 gains this year

Bloomberg

Even with a brief halt in November when positive test results from the Covid-19 vaccine prompted a move into declining cycles, technology has emerged as the best performing sector in Asia and Europe. Fans of the strategy saw value false startups throughout the year, as investors bet that the day of the group of shares, defined by cheap and largely include circle-sensitive names economic. They were a disappointment.

“Never forget the impact of technology,” said Alan Wang, portfolio manager at Chief Global Investors in Hong Kong. Thanks to cheap loan costs, “a lot of new technology has been reassessed and this (pandemic) has just given them a great opportunity to reshape our lives.”

Innovative stock is now valued on intangible factors such as goodwill and intellectual property rather than traditional methods such as price-to-earnings ratios, Wang said, noting that investors should undertake such evaluation strategies.

Cash is King for Companies

The pandemic and the speed with which it has been on the markets have shown investors that they should stick to companies with strong balance sheets that can ride waves of uncertain times.

“Stock stability in a year like this will help determine the value and justify the higher valuations in a low-level world,” said Tony DeSpirito, chief investment officer of the U.S. core operational equity at BlackRock.

2020 confirmed two important lessons of DeSpirito learned over the years: investors should put pressure tests on companies to see if those companies ’earnings and balance sheets are strong enough to survive a recession at normal times; and should diversify investment risks and also increase sources of alpha potential.

Be aware of collateral damage