The impact of Covid-19 is still reverberating across economies around the world and the lockdowns introduced to manage the spread of the disease has led to a shift in consumer behaviour.
Having a large portion of your staff working from home has become the norm (for now at least) and conducting face to face meetings over Zoom is part of the new norm.
Some of the changes we have seen from 2020 up until now had started much earlier however Covid-19 has accelerated the changes in the way business is done and how we conduct our professional and personal lives.
There are a number of sectors to watch as a result of the changes introduced by covid-19 and what has transpired in between i.e the measures outlined by the Biden administration in the US.
In no particular order, these are the sectors worth paying a close attention to in the coming months and years.
Electric Vehicles
The EV sector is growing as new players come to the market and traditional car manufacturers such as VW group and Mercedes take steps towards producing a larger quantity of electric vehicles.
One of the main takeaways from our article How the Biden administration may impact your portfolio is the administration’s shift toward clean energy and the investment in infrastructure to support this aim.
In the US, China and EU, electric vehicle sales have been rising and this trend is set to grow stronger as regulation is enforced and as the governments follow the measures in place to meet their carbon emissions target.
There are a number of risks in this sector as with any others and it includes but not limited to the following. Lockdown due to covid-19 has and can affect manufacture and supply lines and any associated time frames.
Political changes can have an impact in this space among other changes such as laws that are passed or changes in technology. There are a number of ways to get in on this trend which includes purchasing stocks or ETFs in this sector. It is crucial to pay attention to the aspects to the supply chain such as battery manufacturers and mining companies for opportunities.
The Rise of Bitcoin and other Cryptos
Continuing from late 2020, we are seeing and should continue to see greater interest in Bitcoin and other Cryptocurrencies.
Bitcoin has hit new highs three times in less than six months and some may argue we are in bubble however this could be a reflection of the increased interest in Bitcoin.
Elon Musk revealed Tesla has bought $1.5 billion dollars worth of Bitcoin and plans to accept Bitcoin as a form of payment. More details on this link. Master Card and Visa are more examples of companies in 2021 that have mentioned an interest in Bitcoin and on the 19th of February 2021, Bitcoin hit a market cap of $1 trillion dollars and it took twelve years to accomplish this.
There are concerns expressed by various parties due to how quickly the price of Bitcoin has risen so caution is advised especially as players with deeper pockets get involved.
In the past few days as of February 2021, some central banks are making moves into having their own digital currency using blockchain technology. This is one of many development happening in this space including Bitcoin being accepted more widely as a payment.
Apart from Bitcoin, there are other crypto currencies such as Etherum and Litecoin that are getting more interest from investors and that to an extent is reflected in the price.
E-Commerce
Covid-19 and the lockdowns introduced accelerated changes in what we bought and where we purchased it. Purchasing groceries and almost everything online is the new norm and this trend is getting stronger.
According to data from Statista, Global e-commerce sales in 2019 was over $3.trillion. In 2020 that figure was over $4.2 trillion and is projected to be $4.927 trillion in 2021. As more and more people gain access to the internet we can see a digitization of people spending habits even more. The same report shows Turkey to have the highest compound annual growth rate (CAGR).
There are opportunities at different stages of e-commerce such as sourcing products, Dropshipping, selling on Amazon or Ebay or even Affiliate marketing. In China there are big players such as Alibaba, JD and Taoboa whose supply lines were impacted to an extent by the lockdown however as the world begins to open up further and the lockdown is eased, we should see an increase in B2B e-commerce.
As an investor there are different ways to play this including looking at companies in this sector in particular regions that are growing, ETFs that track retail, and looking at logistics or delivery companies.
Commodities
Commodities are another sector to pay close attention to especially as things get back to normal.
In Energy, we can see a resurgence in the price of oil because as the vaccines are rolled out to cover a large portion of the population, governments around the world are looking to end the lockdowns in place.
Travellers who have been at home and unable to travel are itching to get out and explore the world and this means more flights. Considering one of the biggest consumer of oil is the airline industry, this trend is set to grow stronger as we approach the summer months if restrictions are relaxed.
Poor harvest due to bad weather, hoarding of Soyabeans due to uncertainty caused by Covid-19 pandemic and other factors is causing an increase in the price of soya beans. Investors are looking at Copper, Gold and other metals as a hedge against inflation.
ESG – Environment Social and Corporate Governance
ESG stands for Environmental Social and Governance and investors are using elements of this to determine which companies they invest in. It is part of a larger aspect of Sustainable Investing.
Inequality and climate change are part of the driving forces of this criteria and investors are putting money into companies that meet certain criteria in each of these categories. Younger investors are increasingly aware of the social and environmental issues and how companies affect the environment and are affected by it.
Inequality due to lack of economic access or social unrest are some of the factors driving interests in ESG. The pandemic and lockdown that followed revealed unique ways in which different companies, people and the environment were impacted and has started a conversation in this space.
Environment
The first aspect of ESG stands for Environment and this looks closer at how a company does its business and the environmental impact. Factors such as climate change policies, the companies carbon foot print, recycling and waste disposal and any environmental friendly initiatives are examined in this criteria.
Social
Social is the next aspect to consider and it looks at things such as the company culture, diversity within its ranks, suppliers, employee perks and the compensation among other things.
The goal here is to evaluate the quality of the relationship the company with the people within the company and outside the company. This looks at things like customer satisfaction, labour standards, human right and community relations.
Governance
Governance is the last letter in ESG and it looks at how the company is governed and the team or management behind it. Aspects such as lobbying, salaries for executives and the composition of the board and corporate governance are considered and scored in this criteria.
Income and racial inequality issues have come to light even more so during the pandemic and this trend is not waning. During the pandemic many people who did jobs where they cannot work remotely such as construction, retail were impacted financially as they were forced to stay at home or as building projects were halted.
The death of George Floyd and many others in the past years have ignited conversations around institutional racism and the lack of representation for women and ethnic minorities in many businesses.
Companies have seen this and are taking steps to address these issues. Improving their ESG score sends a message to investors that they take these issues with the environment, inequality and corporate governance seriously.
Final Note
There are a number of exciting sectors that present opportunities to invest. Some of these changes are driven by changes in consumer habits, how Business invest and the socio economic climate.
We live in an increasingly dynamic world and the sectors that reflect how people interact in they post-working-from-a-office era are showing stronger trends and are worth keeping an eye on.
