Investment headwinds will still exceed the tailwinds in 2021 — but there could be more major opportunities now than in perhaps the last 10 years if you know where to look.
This is my bold and, given 2020, perhaps surprisingly optimistic forecast as investors around the world focus on rebalancing portfolios for 2021, after a year no one expected.
2020 was a year for which nobody had planned. This included investors, many of whom were caught spectacularly off-guard by not having properly diversified portfolios, which left them open to untold financial risks.
Looking ahead to 2021, it is likely that investment headwinds will still exceed the tailwinds — but, I believe, that there are also more major investment opportunities to be had in the next year than perhaps in the last decade.
Headwinds are the factors that likely weigh on growth and returns, and tailwinds are those that can be expected to boost growth and help drive positive returns.
The major long-term headwind from the fallout of 2020 is unemployment, which will hit demand, growth, and investment.
There’s also the roll-out of a mass global vaccination agenda which will be a lengthy process and logistical minefield, plus there are the “vaccine sceptic” concerns to address.
Meanwhile there are geopolitical issues that could impact on investor returns. These include the significant readjustment that will need to happen following Brexit, U.S.-China trade relations, which are likely to become increasingly competitive especially in the tech sector, and the rising border tensions between India and China, among others.
However, despite the significant headwinds, there are major investment tailwinds in 2021. These include the rollout of the COVID-19 vaccines, which means economies can be expected to begin solid recoveries; also it is likely that governments will continue to offer fiscal support packages as their economies recover from the pandemic, offering a floor for markets.
To quote Einstein, “In the midst of every crisis, lies great opportunity.” This is why, after such a monumental crisis, I believe that if you know where to look and act appropriately to build your wealth, there could be plenty of key opportunities to come.
The pandemic has accelerated history, speeding up and exacerbating major trends in just a few months, that ordinarily might have taken decades to be fully realized.
The global economy, how we live, do business and interact remains fundamentally changed. It is doubtful the world will go back exactly to how it was pre-COVID-19 — there are many aspects of the “new normal” which people like and support, such as working from home. Consequently, some of the major shifts are unlikely to be reversed.
As such, investors need to look for the lower entry points of quality companies to top-up their portfolios and, critically, they need to bear in mind how the world has changed.
Their portfolios must reflect the future, not the past.
Headwinds will surpass tailwinds in 2021 as the world readjusts, but it’s essential that investors stay invested. As we know, history has shown us that stock markets tend to go up over the long term.
But as the world moves ahead to a post-pandemic era, it’s crucial that investors ensure their portfolios are suitably diversified across asset classes, sectors, currencies, and regions, so as to make the most of the considerable opportunities that will inevitably present themselves.
Nigel Green is founder and CEO of deVere Group. One of the world’s largest independent financial advisory organizations, de Vere does business in 100 countries and has more than $12 billion under advisement.
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