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Investing in the era of COVID-19
Investment experts weigh in on what the future holds for share trading.
Investors around the world are wondering how major political and economic events – such as the US election and a reduction in stimulus measures – will impact asset prices.
So to investigate what might be in store, financial comparison platform Finder checked in once again with investing experts from around the globe (33 in all) to see what the future holds for investing.
Note: The panelists below were surveyed in October 2020.
Who are our panelists?
|Ahkter Bin Abdul Manan||MNRB Holdings Bhd||GCIO|
|Alistair Schultz||ACY Securities||Chief market analyst|
|Peter Cziraki||University of Toronto||Assistant professor|
|James Gauthier||Justwealth Financial Inc.||Chief investment officer|
|Daniel J Deming||KKM Financial, LLC||Managing director|
|Suzanne Gaboury||Suzanne Gaboury||Chief investment officer|
|Nitin Dialdas||MDN Capital Ventures Limited||Director|
|Steven Adang||Anchor Pacific Investment Management Corp.||Chief investment officer|
|Petri Redelinghuys||Herenya Capital Advisors||Founder/Director|
|Nikhil Kamath||True Beacon||CIO|
|Kyle Rodda||IG Australia||Market analyst|
|Jemmy Paul||Sucorinvest Asset Management||CEO|
|Dr Alexander Tziamalis||Sheffield Hallam University||Senior lecturer in economics|
|Francis Marais||Glacier||Head of research|
|Stephen Innes||Axi||Global chief markets strategist|
|Lindsey Bell||Ally Invest||Chief investment strategist|
|Marie-Josee Privyk||Novisto||Head of ESG innovation and customer success|
|Jessica Amir||Bell Direct||Market analyst|
|Moses Ojo||PanAfrican Capital Holdings Limited||Chief economist/Head of investment research|
|Karl Schmedders||IMD Lausanne||Associate professor (Finance)|
|Adrian Hia||Kairous Capital||Investment director|
|Pierce Crosby||TradingView, Inc.||General manager|
|Trevor Lee||Rosebank Wealth Management||Investment specialist|
|Lee Smales||University of Western Australia||Professor of finance|
|Petrus Koekemoer||Coronation Fund Managers||Head of personal investments|
|Craig Turton||EasyEquities||Vice president of wealth|
|Danielle Shay||Simpler Trading||Director of options|
Will share trading and investing apps dominate?
With apps such as Robinhood and Acorns gaining widespread popularity, we asked our panel if apps will become the main investment channel for retail investors.
The majority of the panel (59%) expect apps to dominate the retail investor market. Some panelists think that share trading apps will be adopted faster than others. Just 16% think it will take apps a decade to dominate, 41% think it will take 5 years and just 3% think it will happen in less than 12 months.
Chief market analyst at ACY Securities Alistair Schultz is one of the 41% who don’t think that apps will take the place of traditional brokers.
“Robinhood-style brokers have a simplicity that suits the new age of investing, but as investors grow both in account and sophistication, their needs of the simple transition to the complex.”
Retail investing to slow as stimulus is wound back
Over three-quarters of panelists (76%) believe that the winding back of stimulus will have some impact on retail investing. The majority (61%) believe that a reduction in stimulus will have somewhat of an impact on the sector, with the remaining 15% believing that it will cause a big reduction in retail investing.
|Will the winding back of stimulus have an impact on retail investing?||% of respondents|
|Yes, a big reduction||15%|
|Yes, somewhat of a reduction||61%|
Chief investment officer of Justwealth Financial Inc. James Gauthier is one of the panelists predicting a big reduction in retail investing, likening the current market situation to the tech bubble.
“The onset of the stimulus occurred on or around the time of the bottoming of equity markets. Thus new retail investing assets have experienced nothing but up markets – similar to the building of the tech bubble in the late 90s. It’s fun and there is no fear when you can’t make a mistake, but when the bubble bursts, retail investors will likely get burned and run away as quickly as they came in.”
Nitin Dialdas, director at MDN Capital Ventures Limited, responded in kind, saying that the market is due to experience pangs of withdrawal as stimulus dries up.
“Stimulus has acted as a drug to the stock markets. However, once the stimulus measures are eased, the rehab process will be very painful.”
Just 24% of the panel said there won’t be a big reduction in share trading activity as stimulus is wound back. Simpler Trading’s director of options Danielle Shay, put it this way:
“Government stimulus is causing the stock market to trade higher, despite the underlying recession, because investors know that the government will do anything to uphold the economy, and they don’t need to worry. Those who suggest the market is flying because people used their $1,200 to invest in stocks are mistaken. Yes, the market is up because of stimulus, but it’s because investors can have confidence, not because of the percent of people who invested $1,200 extra dollars into the stock market.”
Stock indices predictions
We asked panelists to provide an end-of-year value forecast for six major stock indices and averaged their responses to get an overall panel prediction.
On average, the panel thinks the Nikkei will increase in value the most from 1 October to 31 December (up 520), followed by the S&P/ASX200 (up 105), while the FTSE100 and S&P500 are expected to remain around the same (up just 5 and 7 respectively). On the other end of the spectrum, the panel thinks that the DAX and the NASDAQ will end the year below their 1 October values. The DAX is predicted to drop the most, by 279, while the NASDAQ is expected to drop by 155.
The panel predicts that the S&P/ASX200 will end the year on 5,921 – 11% below its 2 January value of 6,684, but 17% up on its 1 April value of 5,077.
The panel predicts that the FTSE100 will end the year on 5,872 – 22% below its 2 January value of 7,542 but 4% up on its 1 April value of 5,672.
The panel predicts that the S&P500 will end the year on 3,393 – 5% above it’s 2 January value of 3,245 but 36% up on its 1 April value of 2,498.
The panel predicts that the NASDAQ will end the year on 11,137 – 23% above its 2 January value of 9,039 and 49% up on its 1 April value of 7,460.
The panel predicts that the DAX will end the year on 12,533 – 5% below its 2 January value of 13,234 and 30% up on its 1 April value of 9,611.
The panel predicts that the Nikkei 225 will end the year on 23,704 – 2% above its 2 January value of 23,320 and 27% up on its 1 April value of 18,686.
Panelists predict another US stock market drop
The coronavirus market crash earlier this year was short-lived, giving way to a bull market. However, with many countries reporting the beginnings of second or third waves, it begs the question: Is the US stock market up for another, maybe even bigger, drop?
According to three out of four panelists (72%), a second wave could lead to another stock market drop, but it will be smaller than the first one. 13% of the panel think a second wave could cause a larger stock market drop, 3% think it will be about the same and 13% don’t think there will be a correlating drop at all.
When asked about the main factors that would impact the US stock market until year-end, panelists like associate professor (finance) at University of Western Australia Lee Smales and professor of finance at IMD Lausanne Karl Schmedders cite the uncertainties surrounding the US elections.
Simpler Trading director of options Danielle Shay agrees, but adds that the pandemic and corresponding stimulus are also key factors.
“Upon further stimulus and a worsening pandemic, I expect COVID-19 stocks to continue to rise, while companies in sectors more significantly hurt will suffer. This pandemic has caused severe inequality in the reaction of stock prices,” said Shay.
Meanwhile, 13% of panelists believe that a second wave of COVID-19 will bring about a bigger stock market drop. Top factors cited by these experts also include the pandemic, the US elections and even Biden’s corporate tax and regulatory impulses.
Rosebank Wealth Management investment specialist Trevor Lee, on the other hand, is part of the 13% that do not believe a second wave would result in any correlating stock market drop, referencing investors and fund managers as the drivers of the markets above anything else.
“Current bond yields means there are fewer alternatives for money… Retail investors need somewhere to invest… In the short term, emotion from retail investors and the fact that fund managers have few alternatives are helping to drive the markets,” he said.
Biden predicted to be better for global markets
When asked which presidential candidate they believe will be better for the global economy, 65% of our panelists said Biden and 35% said Trump.
Heranya Capital Advisors founder Petri Redelinghuys said the markets could react poorly if Trump loses outright.
“I personally do not think that Trump is going to be a force for good in the world, but I do think that the market will react very poorly if either he loses outright or the election is contested. Thus, I suppose, Trump is good for markets,” he said.
Glacier head of research Francis Marais thinks that in the short term, Trump would be the better option for global markets. However, he notes that there are other factors we need to consider that may not be addressed if Trump takes the seat yet again, such as environmental, social, political and trade risks.
Meanwhile, Bell Direct market analyst Jessica Amir thinks a Biden win could result in some economic bumps.
“…the Democratic Party will look to further the healthcare reform following on from Obamacare. This is likely to be detrimental to US healthcare stocks, as the focus will be on providing public health care and moving people to the government payment option. The move away from commercial/private health care will reduce the profitability of the private sector,” she said.
However, Amir notes that the concern surrounding the US elections are not focused on who will win the presidential race. Rather, the outcome of the markets depends on who will win the senate and what legislation they will enact.
“There are risks around the upcoming US election, and with European COVID-19 cases spiking. But this appears manageable, given the momentum behind economic growth and knowing that economic cycles drive markets, not elections,” she said.
With the global travel industry grinding to a screeching halt amid the COVID-19 pandemic, murmurs of travel stock bargains are increasingly louder. However, just two-fifths of our panel (39%) say now is the time to buy airline shares. The remaining 61% don’t think the time is right.
The majority of panelists (60%) say countries that have more control over the COVID-19 pandemic, such as Australia and New Zealand, offer better investment opportunities.
IPO with the best potential?
When asked for their top IPO picks, over a third of the panel (36%) mentioned Alibaba’s affiliate company, the Ant Group. Airbnb, Palantir and Snowflake were also cited by a couple of panelists each, with around one five (18%) saying that these IPOs have the most potential. Meanwhile, one panelist, Revix CEO Sean Sanders, has his sights on Robinhood.
Stocks should be the top choice for retail investors
The majority (63%) of panelists think that stocks show the most promise for investors over the back half of 2020. Gold is the second-most popular asset class, with 17% of panelists recommending it. Tied for third (or last) are bonds, cash and cryptocurrency, with 7% of panelists recommending them.
|Which asset class shows the most promise?||% of respondents|
Gold prices to stay put
An overwhelming majority of the panel (63%) think that gold prices will hold at their current level of around US$1,800/oz until the end of the year. However, almost a third (30%) predict a sharp rise in the price of gold before the clocks tick over to 2021, expecting gold prices to rise by about 39% to be worth around US$2,500/oz. A further 4% think prices could reach around US$3,000/oz before the year is out.
|How much will gold be worth by the end of 2020?||% of respondents|
While Petri Redelinghuys sits with the majority of panelists in believing that gold prices will sit at around their current rate, he isn’t writing off some upward movement in its price by the end of 2020.
“I think gold trades higher on the back of more stimulus, fears around a contested US election and fears around Brexit. I don’t think it hits $2,500 though… that’s a bit wild. Around where it is now, maybe as high as $2,200.”
Sanders is the most bullish of all our panelists about the prospects of gold tipping prices of around US$3,000/oz by the end of the year. He thinks that not only is gold a good investment right now, but that people should keep an eye on Bitcoin as well.
“…We’ve seen unprecedented stimulus that will likely filter down into economic growth and inflation at some future date. Inflation expectations are what matters for markets over the short-term and a small inflationary surprise will result in a big asset allocation shift to gold and Bitcoin.”
What other safe-haven assets are our panelist backing?
Like Revix’s Sean Sanders, TradingView Inc.’s general manager Pierce Crosby also sung the praises of Bitcoin, seeing higher potential in the cryptocurrency than gold.
“I’m not sure who has identified gold as a safe-haven asset, but I’d rather hold greenbacks or Bitcoin.”
Suzanne Gaboury, chief investment officer at FinDev, said, “In addition to gold, government securities/bonds are another safe-haven. Global diversification is the key right now.”
Chief investment officer at Anchor Pacific Investment Management Corp. Steven Adang sees the “Yen as another safe-haven as well as TIPS as a replacement for LT Treasury bonds.”
Associate professor of finance at University of Western Australia Lee Smales also pointed to the yen as a possible option for investors.
“I think the high amount of political (and COVID-19) uncertainty will create a demand for [gold]. I think silver is another… also Swiss franc and Japanese yen tend to do well in the possible scenario I am envisaging.”
Oil prices to remain steady
Like with gold prices, the majority (61%) of panelists believe that oil prices will remain at their current levels, with about a quarter (26%) predicting prices to rebound, and 10% believing prices will continue to fall.
|How will oil prices move?||% of respondents|
|Remain at current level||61%|
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