Investors have likely discounted the worst-case scenarios that flashed up amid the initial global covid-19 outbreak, when volatility hit a post-global financial crisis peak, but are understandably wary of the effects of the current second waves of infections. It’s likely that volatility will stay above pre-pandemic levels until reliable vaccination programmes are implemented.
We see persistent dislocations between several asset classes as momentum continues to dominate markets. Value, for instance, has persistently underperformed for over a decade, a track record exacerbated by the ‘stay at home’ trade’s support of growth companies. Could value stocks be cheap enough to attract investors’ attention?
The energy transition is gaining momentum: the European Union, China and the US respectively seek climate neutrality by 2050, carbon neutrality by 2050 and a return to the Paris Agreement this year. Long-term oil and coal demand are set to decline 40% and 20% by 2040 amid a projected increase in renewables-sourced electricity and adoption of electric vehicles. Investors stand to profit by landing on the right side of change.