Investors need to now top up their portfolios in value and growth stocks as we prepare for a stronger than predicted global economic rebound.
Earlier this week the Dow Jones rallied to a record intraday high, and in Europe markets were also buoyed, as we are seeing that the first half of 2021 is going to be totally different for the markets compared to last year.
Indeed, this time 12 months ago, coronavirus panic and uncertainty was everywhere and the global stock market crashed.
Now here we are, a year later, and thanks to global vaccine rollouts, stimulus packages, record savings and pent-up demand, a major economic recovery is on the way.
It’s my view that the global economic rebound will be more robust than forecast, particularly in developed economies. In fact, we could witness the fastest growth in decades.
Proof of this is the Federal Reserve pulling its three lending programs at the end of March due to insufficient usage.
So, as we hurtle towards this likely economic boom, where should investors’ attention be focused?
The ‘rotation’ phenomenon has been receiving a lot of air play. This is a move into sectors that could benefit from increased inflation and an improving economy, such as financial, industrial and energy stocks, and out of tech stocks that experienced a boom during extended lockdowns.
That said, it’s essential that investors incorporate both value and growth stocks into their portfolios.
Post-pandemic, it’s highly probable we’ll hang on to certain lockdown habits, such as working from home more often, but we’ll also be back on planes, attending events, going to the gym, and we’ll be way more conscious of the environment and hygiene measures.
Yes, value stocks are set for a revival, but does anyone suddenly believe that Amazon, Google and Tesla are not companies of the future?
Three months in and the markets in 2021 are already very different. Consequently, investors will not want to miss out on the major economic rebound.
They should top-up their portfolios, and ensure they are suitably diversified sooner rather than later, to mitigate risks and make the most of the opportunities.
Nigel Green is CEO and founder of deVere Group, one of the world’s largest independent financial advisory and fintech organisations.
Photo: Petra Wessman