Where to invest in 2021
We all know investing is tricky and timing is everything, to buy the dips and all the cliches about the stock market. But for sheer roller-coaster extremes, it’ll be hard to beat 2020. The ASX 200 dropped below 4507 on March 23 after reaching an all-time high of 7162 just over a month earlier.
It steadily climbed to finish 2020 about where it started the year. In 2021, there is a new presidential administration taking over in the US, which will affect the US markets, which will affect the ASX. We also will have COVID-19 vaccines rolling out, an Australia-New Zealand travel bubble agreed, and efforts to leave behind the nation’s first recession in three decades. With all that in mind, what should you invest in in 2021?
Pilbara Minerals CEO Ken Brinsden is on the record as saying he expects the lithium market to triple over the next half-decade. The incoming Biden administration in the US is placing an emphasis on renewable energy, in particular electric vehicles, which require lithium for their batteries. The pandemic has also caused large Westernised nations to look for alternatives to China for their supply chains. Australia, which produced more than half of the world’s lithium in 2019, could be a beneficiary. The world is going to need a lot of batteries in the near future, and the raw materials have to come from somewhere.
With international borders closed or open to only a handful of countries in travel bubbles over the course of the pandemic, the industry took a severe hit. Which means stock prices are low right now. But people haven’t lost the desire to travel, so there is a huge amount of pent-up demand. As vaccines become widespread and more borders open, airline, cruise line, and hotel stocks are sure to shoot up as revenue returns and future bookings increase. Stock price is largely a function of future outlook, so even bookings a year or two out will provide a boost.
Even when the pandemic is in the past and everyone who wants a vaccination can get one, not everyone will return to regular office work five days per week. Hybrid work, with employees splitting their time between a central office and remote work will be a legacy of COVID-19. To keep things running smoothly, companies will need to beef up their IT capabilities over a wider network with more access points and security concerns. The increased rollout of 5G infrastructure and need to update data centres will keep techs busy and growing.
With people going out into the world again, that means a lot more buildings back in use, a lot more transportation usage, etc. That means a lot more power and fuel use. In the short term, that means more fossil fuels and natural gas. Though there remains a fight for the soul of Australia’s energy future, the technology road map laid out by the Government includes a transition to more renewables. Renewable energy is growing steadily and becoming cheaper than some alternatives. With a large majority of Australians concerned about climate change, the writing is on the wall.
Despite, or perhaps because of, being the epicenter of the pandemic, China has recorded less than 5000 COVID-19-related deaths and has been in full swing economically for some time. Those numbers are likely inaccurate, and the way they achieved control of the virus is not palatable to most democracies, but the fact remains. Other Asian countries such as Vietnam have seen supply chains relocated from China, and countries that navigated SARS and other respiratory diseases were better prepared for COVID. Along with Australia and New Zealand, they’re way ahead of other parts of the world in terms of recovery. Australia and China have certainly had their disagreements of late, which makes other Asian countries desirable trade partners.
What you think is right
What you invest in is increasingly not just a way to make money but a way to support what you want to see in the world. Maybe you don’t want to see large corporations get larger at the expense of the little guy. Maybe you don’t want to encourage use of fossil fuels. Maybe you have qualms about how the workers are treated in those Asian markets. Maybe you have problems with how mining operations are carried out. Impact Investing Australia and Social Ventures Australia are among the investment firms evaluating companies based on corporate social responsibility. BlackRock, the world’s largest asset management firm, is focusing on investments that combat the climate crisis. With the level of customisation available in portfolios now, odds are you can devise a plan you feel good about and that offers a return in your investment.