History tells us 2 investment sectors will take off post-COVID

A 90% effective vaccine has everyone excited. Now where do investors go from here? This is what some of experts are thinking.

learning from the history of investment represented by old book opening with gold starts flowing from it

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The revelation overnight that a COVID-19 vaccine showed 90% effectiveness in testing sent the share market into wild celebrations overseas and in Australia.

Whether this news from co-makers Pfizer Inc (NYSE: PFE) and BioNTech SE (NASDAQ: BNTX) turns into an actual jab ready for the general population remains to be seen.

Regardless of this, one day the world will move on from the coronavirus. A vaccine will come, a treatment will be developed, or nations will learn to live with it.

So which shares are set for a rally in the post-COVID world?

Trading platform provider IG Group Holdings plc (LON: IGG) analysed what happened in the global financial crisis in the late 2000s. It then combined history with the opinion of 253 hedge fund managers and economic experts for the answer.

The obvious answer

This is not a massive shock, but 73% of the experts picked health and pharmaceutical shares to “increase in value” over the next 12 months.

“The pharma industry in terms of growth opportunities will come in two parts, and this is what comes out of the survey,” IG Group global head of Prime brokerage sales Max Hayden said.

The first part is the short-term race for a COVID-19 vaccine.

“The companies that are working on and will achieve that, obviously are ones to watch for the future.”

Then the second is the long-term potential for ongoing business from keeping COVID-19 at bay.

“Like the flu, COVID-19 is not going away. Pharma companies will have to keep producing and, importantly, refining vaccines for years to come as the virus mutates and proliferates,” read IG’s report COVID-19 vs The Global Financial Crisis.

“This should keep pharma investments strong and, potentially, bring new companies into the spotlight if they can pioneer new COVID-19 vaccines or treatments.”

The more surprising answer

One stark pattern both in the United States and Australia on Tuesday is that while the markets generally shot up like a rocket, technology shares actually sank.

The implication seems to be that a COVID-19 vaccine would eliminate the need for people to work, shop and play from home — therefore technology becomes less important.

Does this seem a bit myopic? IG’s study certainly thinks so.

A healthy 66% of the hedge fund and economics experts surveyed thought tech shares would “increase in value” in the next 12 months.

“Companies with interests in digital technology and remote working should prove to be strong performers over the next five years,” stated the IG report.

“Also, digital companies with fewer physical assets, or ones that are able to embrace the new socially distant, tech-first culture will survive the crisis.”

The virus-ravaged airline and travel sector was picked by 50% of experts as one where stock values would appreciate.

Sector Experts who thought ‘likely to increase’ 
Health and pharmaceuticals 73%
Digital technology 66%
Airline and travel 50%
Financial services 46%
Retail 40%
Real estate 38%
Automotive 36%
Cryptocurrencies 23%
Precious metals 18%
Indices 17%
Oil 15%
Currency exchange 13%
Source: IG report COVID-19 vs The Global Financial Crisis
Table created by author

 

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