Pandemic a catalyst for change, but only some of it lasting

Jun Bei Liu explains the lasting impacts of the coronavirus such as the accelerated rise of environmental, social and governance (ESG) investing, the changing work and consumption patterns and the opportunities these present to investors.

Jun Bei Liu

Pandemic a catalyst for change, but only some of it lasting

March 29, 2021
Jun Bei Liu explains the lasting impacts of the coronavirus such as the accelerated rise of environmental, social and governance (ESG) investing, the changing work and consumption patterns and the opportunities these present to investors.
Read Transcript

It has been a little over 12 months since the coronavirus shut down the world, in turn driving the deepest economic downturn since World War II and the fastest equity bear market in history.

At the time, with no precedent in dealing with a global health crisis, fear and risk-off behaviour was magnified as governments around the world implemented social restrictions and rushed to close borders.

Expectations of the size of the economic and financial market impacts were hastily made when the fear factor and level of uncertainty was at its highest. Predictions of house price declines of 20 per cent were commonplace as were fears that the economy, corporate earnings, dividends and the labour market would take years to recover to pre-pandemic levels.

Of course, with the benefit of hindsight, we now know expectations were almost universally too pessimistic. In fact, the Australian economy, which dropped perspicaciously in the second quarter of 2020, was bouncing back by the third quarter. The equity market reached its lows only 43 days after peaking and has been rising steadily ever since.

It is safe to say that Australia’s economic and equity market recovery has exceeded expectations at very nearly every level since mid-2020 as a result of extraordinary levels of fiscal and monetary policy support and relative success at containing the virus.

If history has taught us anything, it is that you must address the root of the problem before financial markets and economies can form a sustainable bottom. For a health crisis, it meant containment of the virus. For the resulting economic crisis, it meant enough policy support to limit the damage.

Thankfully, Australia had the right response for both and built a bridge to the other side of the crisis until a vaccine emerged.

But while the economy has recovered faster than imagined, and the equity market has looked through the downturn as only a temporary blip, there have been some lasting implications for the economic and investment landscape.

COVID-19 induced lockdowns and social distancing requirements have been the catalyst for a number of permanent changes in working and consumption habits. Remote working raised the need for home based technology such as Zoom and access to online offerings such as Red Bubble and Temple & Webster.

This was at the expense of more traditional office-based requirements including floor space and commuting requirements.

Those technology providers that were focused on productivity tools, telco access, e-commerce and logistics were all short term winners, but are also likely to continue to benefit in a post COVID-19 world as well.

The potential for a reopening of international borders (even if through travel bubbles and vaccine passports) is likely to help underpin the upside in more cyclical areas such as travel and leisure, gaming, hotels, and real estate.

However, it is important to distinguish between cyclical and structural shifts as we look forward. While the equity market is excited about the potential for further value versus growth stock performance, it is unlikely that this is more than a cyclical upswing that will begin to fade as economic and earnings growth normalises.

Perhaps one of the most positive developments out of the past 12 months has been how COVID-19 has accelerated the importance of ESG investing as social factors finally rose to the same level of importance as good environmental and governance practices.

Worker safety and wellness, workplace flexibility, diversity, inequality and governing compensation are now all at the forefront of corporate behaviour. It only took a global pandemic to get there!

While the pandemic has been tragic in terms of the loss of lives, it has been the catalyst to align corporate and investor preferences with wider social issues and commitments such as climate change – which will have lasting impacts on how and where to invest – as well as the health and wellbeing of the planet.

Once again, we are reminded of the durability of economics and the adaptability of corporates and consumers in adjusting to changing circumstances.

Investors are also reminded that COVID-19 has brought on the future of work and consumption at a much faster than expected pace and this will have lasting impacts on where to invest.

Quite simply, there has never been a better environment for active investors and stock pickers and as an active investor, the current market conditions are ripe with opportunities.

 

This article was originally posted on The Australian Financial Review here.

Licensed by Copyright Agency. You must not copy this work without permission.

 

It has been a little over 12 months since the coronavirus shut down the world, in turn driving the deepest economic downturn since World War II and the fastest equity bear market in history.

At the time, with no precedent in dealing with a global health crisis, fear and risk-off behaviour was magnified as governments around the world implemented social restrictions and rushed to close borders.

Expectations of the size of the economic and financial market impacts were hastily made when the fear factor and level of uncertainty was at its highest. Predictions of house price declines of 20 per cent were commonplace as were fears that the economy, corporate earnings, dividends and the labour market would take years to recover to pre-pandemic levels.

Of course, with the benefit of hindsight, we now know expectations were almost universally too pessimistic. In fact, the Australian economy, which dropped perspicaciously in the second quarter of 2020, was bouncing back by the third quarter. The equity market reached its lows only 43 days after peaking and has been rising steadily ever since.

It is safe to say that Australia’s economic and equity market recovery has exceeded expectations at very nearly every level since mid-2020 as a result of extraordinary levels of fiscal and monetary policy support and relative success at containing the virus.

If history has taught us anything, it is that you must address the root of the problem before financial markets and economies can form a sustainable bottom. For a health crisis, it meant containment of the virus. For the resulting economic crisis, it meant enough policy support to limit the damage.

Thankfully, Australia had the right response for both and built a bridge to the other side of the crisis until a vaccine emerged.

But while the economy has recovered faster than imagined, and the equity market has looked through the downturn as only a temporary blip, there have been some lasting implications for the economic and investment landscape.

COVID-19 induced lockdowns and social distancing requirements have been the catalyst for a number of permanent changes in working and consumption habits. Remote working raised the need for home based technology such as Zoom and access to online offerings such as Red Bubble and Temple & Webster.

This was at the expense of more traditional office-based requirements including floor space and commuting requirements.

Those technology providers that were focused on productivity tools, telco access, e-commerce and logistics were all short term winners, but are also likely to continue to benefit in a post COVID-19 world as well.

The potential for a reopening of international borders (even if through travel bubbles and vaccine passports) is likely to help underpin the upside in more cyclical areas such as travel and leisure, gaming, hotels, and real estate.

However, it is important to distinguish between cyclical and structural shifts as we look forward. While the equity market is excited about the potential for further value versus growth stock performance, it is unlikely that this is more than a cyclical upswing that will begin to fade as economic and earnings growth normalises.

Perhaps one of the most positive developments out of the past 12 months has been how COVID-19 has accelerated the importance of ESG investing as social factors finally rose to the same level of importance as good environmental and governance practices.

Worker safety and wellness, workplace flexibility, diversity, inequality and governing compensation are now all at the forefront of corporate behaviour. It only took a global pandemic to get there!

While the pandemic has been tragic in terms of the loss of lives, it has been the catalyst to align corporate and investor preferences with wider social issues and commitments such as climate change – which will have lasting impacts on how and where to invest – as well as the health and wellbeing of the planet.

Once again, we are reminded of the durability of economics and the adaptability of corporates and consumers in adjusting to changing circumstances.

Investors are also reminded that COVID-19 has brought on the future of work and consumption at a much faster than expected pace and this will have lasting impacts on where to invest.

Quite simply, there has never been a better environment for active investors and stock pickers and as an active investor, the current market conditions are ripe with opportunities.

 

This article was originally posted on The Australian Financial Review here.

Licensed by Copyright Agency. You must not copy this work without permission.

 

Disclaimer: This material has been prepared by Australian Financial Review, published on Mar 29, 2021. HM1 is not responsible for the content of linked websites or content prepared by third party. The inclusion of these links and third-party content does not in any way imply any form of endorsement by HM1 of the products or services provided by persons or organisations who are responsible for the linked websites and third-party content. This information is for general information only and does not consider the objectives, financial situation or needs of any person. Before making an investment decision, you should read the relevant disclosure document (if appropriate) and seek professional advice to determine whether the investment and information is suitable for you.

facebook
linkedin
All
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
No items found.
December 10, 2024

Professor Jane Butler: Sparking Hope for Spinal Cord Injuries

In this episode of the Hearts & Minds Podcast, we sit down with Professor Jane Butler to discuss her groundbreaking research into spinal cord injuries.

Read More
impact-podcasts
September 24, 2024

Asian Market Potential with Tom Naughton of Prusik

CIO Charlie Lancaster sits down with Tom Naughton, CIO of Prusik Investment Mgmt. Tom shares his investment philosophy, the opportunities and challenges in Asian markets, and how his 2023 conference stock pick, Swire Pacific (0019.HK), delivered an impressive 30% return.

Read More
investing
September 4, 2024

Building Hearts and Minds with Co-Founders Matthew Grounds and Guy Fowler

In this episode, co-founders Matthew Grounds AM and Guy Fowler OAM discuss their journey in building Hearts & Minds and its philanthropic model that has donated over $70 million to medical research.

Read More
investing
June 25, 2024

Navigating the Resource Sector with Jeremy Bond of Terra Capital

In this episode, we chat with Jeremy Bond, Founder of Terra Capital and HM1 Conference Fund Manager. Tune in for insights into the world of resource investments and the exciting opportunities that lie ahead.

Read More
investing
June 11, 2024

Prof. Nadia Badawi on Cerebral Palsy Breakthroughs and Neonatal Care

Dive deep into the groundbreaking work of Professor Nadia Badawi, an internationally recognised neonatologist and expert in Cerebral Palsy.

Read More
impact-podcasts
May 28, 2024

Investment Insights: Rikki Bannan on Top Picks and Trends

Join us for an engaging episode featuring Rikki Bannan, Portfolio Manager of IFM Investors and HM1 Conference Fund Manager. This episode explores Rikki's career journey, investment strategies, and her 2023 conference stock pick, Telix Pharmaceuticals (ASX.TLX).

Read More
investing
December 6, 2023

Peter Cooper talks building and instilling a culture of humility and excellence

In this episode, our guest is the renowned investor, Peter Cooper, founder and Chief Investment Officer of Cooper Investors (Core Fund Manager). A founding supporter of Hearts and Minds, Peter is a staunch advocate of our model and its philanthropic purpose, actively engaging in every facet of Hearts and Minds.

Read More
investing
November 28, 2023

Jun Bei Liu on her high conviction investment strategy

In this episode, HM1 Chief Investment Officer Charlie Lanchester is joined by Jun Bei Liu. Jun Bei is the Portfolio Manager of Tribeca’s Alpha Plus Fund and since taking over managing the Fund, she has quadrupled AUM.

Read More
investing
November 21, 2023

The world of rare genetic disease research

In this episode, we speak to Associate Professor Gina Ravenscroft. Gina is an Associate Professor in Neurogenetics at the Harry Perkins Institute of Medical Research in Perth. Her research interests are in rare genetic diseases, with a particular focus on neurogenetic diseases in babies and children.

Read More
impact-podcasts
November 14, 2023

Learn what makes a high conviction investment and how to avoid short-term noise

In this episode, our Core Fund Manager Magellan shares how they select top stocks for the HM1 portfolio.

Read More
investing
November 7, 2023

Delve into the world of kids critical care and trauma research

In thie episode, we are joined by Dr. Marino Festa, or Rino for short. He is the Medical Director of NSW Kids ECMO Referral Service and a senior specialist in Paediatric Intensive Care at Children’s Hospital at Westmead.

Read More
impact-podcasts
October 31, 2023

Where Regal's Phil King is searching for opportunities

HM1's CIO, Charlie Lanchester, talks to Phil King of Regal Funds about his passion for stocks, his ongoing search for opportunities, and some of the sectors he’s excited by right now. Phil King of Regal Funds, has been a tremendous supporter of Hearts & Minds since the beginning.

Read More
investing
October 24, 2023

Preventing recurrent miscarriages and birth defects

In this episode, CEO Paul Rayson is joined by renowned biomedical researcher Professor Sally Dunwoodie. Prof. Dunwoodie's groundbreaking work has revolutionised clinical practices and enabled genetic diagnostic tests worldwide. In 2017, her team achieved a double breakthrough with the potential to prevent recurrent miscarriages and various birth defects.

Read More
impact-podcasts
October 17, 2023

Nick Griffin on how he finds global winners

In this episode, CIO Charlie Lanchester chats with Nick Griffin, the founding partner and CIO of Munro Partners, one of HM1's Core Fund Managers. They go over his career to date, reflect on the lessons he’s learned, and trace the decisions that led to him starting Munro.

Read More
investing
October 10, 2023

How A/Prof Matt Call is teaching our body to kill cancer

In this episode, CEO Paul Rayson is joined by WEHI’s Associate Professor Matt Call to talk about his incredible research. Matt’s team teaches and trains the body's own immune cells to target and kill cancer cells.

Read More
impact-podcasts

No results found.

Please try a different search keyword or filter.