It is time to look at the future of #Equities – Research Highlights

Editorial Team OpinioPro
By February 16, 2021 13:23

It is time to look at the future of #Equities – Research Highlights

#Equities – Research Highlights

With the S&P 500 already gaining around 4.27% year-to-date while COVID-19 still lingers through the western world and the U.S. economy shrunk by 3.5% in 2020, it is time to look at the future of equities.

In a recent paper by Columbia Threadneedle Investments named Why we think it’s too early to be cautious on equities, they make a case why equities could go even higher.

Columbia Threadneedle states that the election of President Biden will cause an increase of inflation due to the vaccine rollout and increased fiscal- and monetary support. This increase in inflation will also cause a shift towards value stocks according to Columbia Threadneedle. In terms of sectors they still see opportunities within cyclical technology, financials and utilities due to the green agenda. If yield will rise Columbia Threadneedle has a less favourable view on healthcare, consumer staples and media.

Furthermore, they write that the current gap between the performance of tech stocks and their relative earnings revisions is not a sign of a bubble. Due to there still being buybacks in the sector and the structural story the current situation is not comparable with 2001. When the impact of the Coronavirus will get priced out the technology sector earnings will still grow, but the rest of the market will grow faster.

UBP’s recent white paper UBP’s small- and mid-cap capabilities provides an argument for small- and midcaps. They argue that global SMID caps usually outperform large caps during bull markets. SMID caps also regularly outperform large caps after a recent crisis. With SMID caps lagging behind in recent years the current situation provides a perfect entry point for SMID caps according to UBP.

When looking at SMID caps in the current environment they provide better earnings leverage and less valuation risk in comparison with large caps. UBP provides the following tips: search for quality at a reasonable price, invest in value creation and innovation, seize unique opportunities from market inefficiencies and low research coverage and choose a market that is politically stable and that offers diversification of expertise.

Last but not least, in a recent publication by T. Rowe Price named Gains Still to Be Found in Global Equities they look for ways to find gains in global equities in the current environment.

T. Rowe Price expects that secular growth stocks at good prices will continue to compound good returns soon. Furthermore, the rotation trade that started at the end of last year into value, small caps and non-U.S. stocks could continue this year. Increasing exposure towards stocks with sensitivity towards a post-lockdown world could reap rewards, but selectivity is key according to T. Rowe Price.

Next to selectivity in stocks, looking beyond the United States could also be an option. With the United States having outperformed most regions it could be time to look at Asia-Pacific and Europe for value. According to T. Rowe Price Asia will be the where the gravity of the world is moving towards. Furthermore, Europe also looks attractive but does not offer the same high-growth opportunities that China and The United States offer.

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Editorial Team OpinioPro
By February 16, 2021 13:23

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