Ilja Laursas. The second wave of COVID-19 - what does it mean for business and investors?
Obviously, we are now living in a scenario of a second wave of crisis. Economists say the recovery will take four years instead of two, and projected inflation is the price that people will eventually pay for a temporary solution with state subsidies.
What impact does it make on business and investors? In anticipation of inflation, investors choose non-monetary asset classes: from stocks and funds to real estate. The interesting thing is that in a normal economic crisis, people choose to save money rather than invest in other classes of assets.
Both America and Europe have decided to fight the crisis by printing money - by providing subsidies to businesses. In the short run, the economy takes advantages from it, but such actions ultimately will lead to inflation. Money and savings lose their value, whilst prices go up.
The reason is simple - the money is liquid and can be saved at home. However, it should be noted that when we talk about inflation, cash or monetary instruments turn out to be like hot potatoes, we don’t want to keep them, so we need to put them somewhere
As a result, investor interest is growing. Of course, it is also influenced by the fact that people didn’t travel in the summer, they had a limited number of entertainments and thus saved the money they can invest. We see that the demand for investment products in Lithuania has increased.
Since the beginning of the year, Nextury Technology Fund has earned 30.7 percent for investors, with a return of 44.79 percent over the last 12 months, and the fund grew 9.81 percent during the third quarter. This shows the growing interest of investors and a positively changing attitude towards the investment culture in Lithuania.
Significant growth potential is observed, for example, in the areas of artificial intelligence and blockchain. One of the portfolio companies, Nvidia, rose by as much as 128 percent in the first 3 quarters of this year. Of course, in the short term, the company’s growth was driven by the huge growth in the gaming market during the COVID-19 crisis.
Quarantine measures to combat coronavirus have changed our daily habits and behavior. Technology companies have taken great advantage of this during the first wave of the crisis, with the development of new products and rapid adaption to new realities. Businesses have digitized, moved work from offices to homes, got isolated and etc.
I see a lot of signs that the technology market will continue to grow. The protracted crisis is leading to the digitization of structural, long-term technology companies. Many factories replace people with robots because businesses want security, stability. Inevitable changes are also expected in the future in the fields of logistics and transport when taxi and truck drivers will be replaced by robotic vehicles.
The medical technology, education, public services, and technology sectors have begun to make rapid progress during the COVID-19 crises, so adaptation should be the main focus of business and the focus on investors' return on these areas.