Ilja Laurs. The lockdown will last for at least another year: how will this affect investor behavior in the upcoming year?
2020 was critical, and the start of the new year showed that regardless of the mobilization of all countries against the pandemic and the launch of vaccinations, the world will be closed for at least another year. However, this situation did not stop the whole things in the world. For investors, the first wave of the pandemic brought extremely high returns, can investor expectations and appetites be expected to grow this year as well?
Inflation is a term that the public and investors fear. States have no choice but to raise taxes dramatically or print new money. Investors understand that it is necessary to prepare for this, so they get rid of all monetary instruments - money, bonds. As a side effect, we see increased interest in investing. Once upon a time, people bought TVs, now they are buying apartments, but investors are trying to convert the money into stocks that protect against inflation.
How will inflation affect us, what impact will it have on the economy? The opinion of market leaders is also important here. Can the investment climate be expected to change this year? My opinion coincides with the mood of the industry, which, by the way, is positive. Assessing the returns from the first wave of the pandemic, investors are determined to increase risk. For what reasons? I will draw attention to one of the most important aspects: already after the beginning of the pandemic, the society had to mobilize, adapt to the changed situation as flexibly as possible. Technology has played and continues to play a key role here. We have adapted and improved our skills in the field of technology, every day more and more daily processes are digitized, which are necessary at work, in business, in educational institutions.
Some people will not return to the previous physical world even after the end of the pandemic, as 2020, - the year of forced digitization, - taught consumers to behave differently. New habits, mentality, ability to work with technological instruments will be long-lasting.
E-commerce, the online commerce sector, is currently experiencing a period of rapid boom and these changes are structural, long-lasting as they are forcing the digitalization of the entire business. The digitalisation of consumption and business will remain paramount in 2021, because if we want to live in a digital world, it is not enough to have a digital product, we also need to have consumers who use them. COVID-19 vaccines are not expected to reduce but strengthen the growth of the technology economy, and incentives and interest rates will remain low, so it can be assumed that this will encourage people to be positive. It should be emphasized, however, that while the vaccination process is likely to take some time and the world will still be closed in 2021, there is a high level of investor interest in high technology, which has been affected by the pandemic. We also substantiate this fact with numbers. Nextury Technology Fund, which invests in global high technology, recorded 38.4 percent in 2020 as a return to investors. This shows that even during the pandemic, investor interest remained high and the technology sector was a particularly attractive investment segment, reaching almost 40%, as in 2019 year return. In 2021, even with the advent of vaccines against the virus that has taken over the world, the same rapid growth is expected. We see that global investment and financial companies unanimously recommend increasing the risk share in portfolios, reducing government bonds, and holding less cash. It is advisable to recommend a specific asset class or sector. A new economic cycle is beginning, so it is important to prepare now. What markets will be most exciting for investors this year? Asia, especially China, stands out in the world in terms of both growth and monetary policy. In China, eight percent is projected this year. growth. Compared to Europe, it is the only country that has already recovered from the first wave of the pandemic, so there are plans to focus more on investment in the region.
It should be emphasized that one of the key strategies of Donald Trump’s term was a conscious message to the Chinese technology sector about the global geopolitical competitive advantage of technology. Many famous and large companies have been destroyed. The last victim of this plan was the DJI drone, yet China is one of the most promising, but unjustifiably disadvantaged, countries in terms of investment. Interest in investing in the country’s technology companies is expected to grow in 2021