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How Omicron proves your investment portfolio


It’s starting to look a little like Christmas last year. There is a tree in the Grand Hotel, one in the garden as well, and plenty of rumors of tightening lockdowns and restrictions as the latest Covid-19 rolls around.

But the jury is out on what the latest plot in the pandemic saga will bring to our investments, and what we should do about it.

Should we buy into last year’s pandemic winners – from Peloton to Zoom – or should we assume this latest wave won’t last long and stocks (particularly travel and airlines) recover?

Winter’s Joy: Expert advice for Zoom, exercise Peloton, Apple and Just Eat, as strong performers in this pandemic

Jason Hollands, managing director of wealth platform Bestinvest, is optimistic about continuing normalcy and believes there are deals that can be made.

“I see little prospect of a repeat of 2020 when the shutdowns created a narrow set of stock market winners and many losers,” he says.

We are now in a very different place with both vaccines and treatments for the coronavirus, the easing of emergency stimulus measures by central banks and governments, as well as acknowledging the harmful effects of lockdowns on health, education and the economy.

Find potential winners and losers

Not everyone is in Holland’s optimistic camp. Victoria Scholar is Head of Investment at Interactive Investor Wealth Management.

She says, “Stocks in the travel and hospitality sectors have already been hit amid growing concerns about the Omicron threat. If the new shape continues to pose a public health risk, stocks such as IAG, easyJet, Whitbread and InterContinental Hotels could come under further pressure.”

Ryan Hughes, investment director at rival wealth management firm AJ Bell, believes there will be investment opportunities and risks in the coming months. “The problem is that we’re faced with a binary outcome with different parts of the market performing better or worse depending on whether additional restrictions are imposed,” he adds.

He adds, “Speculating what might happen with a potential close is risky. If you get it right, you can make good profits, but if you get it wrong, you could be in for some short-term investing pain.”

How you respond to the omicron flow is a personal decision. Some investors will choose to do nothing – preferring to think long-term – while others make small adjustments to their portfolios. But to help you decide which camp you want to be in, we offer some ideas on how to put your investments into what seem to be a very challenging few months.

Shares are set to earn if there is more left in the house

With the “work from home” order already in place, it’s tempting to assume we already know how the next few months will unfold – and that includes how the stock market would react if the government defied many of its deputies and orders. insurance.

In 2020, the market fell sharply when the shutdown was announced before recovering. Some sectors have performed better than others, with companies whose products are compatible with the closed lifestyle outperforming those in the hospitality and travel space.

Companies like Peloton could benefit from another shutdown according to analysts

Companies like Peloton could benefit from another shutdown according to analysts

Darius McDermott, managing director of investment platform Chelsea Financial Services, says that if – and this is a big deal – Omicron leads to any kind of shutdown, we could see something similar in the short term.

He adds: “The winners are technology companies and companies that focus on stay-at-home activities such as Zoom and Peloton. As for the losers, they will be the shares of travel, entertainment and hospitality companies.

The world agrees. “Omicron is likely to benefit from the stay-at-home stock with Zoom, the poster child during the pandemic last year, and the performance is expected to outperform if governments impose tighter restrictions,” she says.

“Food delivery companies like Just Eat and Ocado will enjoy the tailwind as restaurant meals are replaced by home delivery services.” But for Peloton, it’s less positive, arguing that many consumers have already purchased expensive tickets.

On the investment fund front, tech-savvy people should thrive. James Carthio, Head of Investment Firms at QuotedData Group, likes the Polar Capital Technology investment trust, noting that it represents a “good buy in the long run.”

The listed trust has generated 127 percent returns over the past three years. Large holdings include Apple and Microsoft, and about three-quarters of their investments are in the United States.

Chelsea’s McDermott loves the AXA Framlington Global Technology Fund. It has also generated 127 percent investor returns over the past three years. The most important collectibles are Apple and Google’s parent Alphabet.

Be prepared to rally in the arrows that have been bombed

Another possibility is that no more restrictions have been introduced, or that they are short-lived enough not to make an impact in the stock market. In this case, investment experts say there may be deals in the sectors that have been bombed that will recover fairly quickly.

“If you are of the view that Omicron will not be as dangerous as you fear, and that economies will remain essentially open, then investors need to look at the sectors that will benefit from an ongoing economic recovery,” Hollands says.

If Omicron does not turn out to be as dangerous as feared, companies such as banks and mining giants may be a good investment.

If Omicron does not turn out to be as dangerous as feared, companies such as banks and mining giants may be a good investment.

We’re talking about financial companies like banks, mining companies, and those industrial giants that have the ability to pass on higher costs to customers and maintain profit margins.

Some investment experts believe that there may be a “rise in value” as those stocks currently undervalued by the stock market recover.

It’s possible, McDermott says. If the shutdown doesn’t happen, I think businesses in retail and entertainment will see a drop in sales as some people decide to stay away – we’ve seen that quite a bit over the past few days.

“But we can also achieve appreciation in the short term as the market realizes that any restrictions will be limited.”

If such a scenario is implemented, he suggests funding Ninety One Global Special Situations and Schroder Global Recovery. Their respective returns over three years are 19 and 29 percent.

Choose gold if you are worried about the markets

There are mutual funds and stocks for investors who want to adopt a safety-first approach in the coming months.

Gold is a good option, says Dzmitry Lipski, head of fund research at Interactive Investor.

“In the past, gold has performed well relative to stocks and other risky assets during periods of severe economic turmoil, market volatility, and high inflation,” he says. iShares Physical Gold Fund tracks the price of gold.

Gold can be a good investment for those who want to adopt a safety first approach

Gold can be a good investment for those who want to adopt a safety first approach

Alternatively, investors can consider a multi-asset investment vehicle such as Capital Gearing.

It has 30% of its assets in US Treasury Inflation-Protected Bonds.

These bonds provide protection when stock markets fall, as well as a shield against inflation.

Triennial returns for both the iShares Fund and Investment Trust Capital Gearing are 35 and 26 percent.

Look at the previous crisis for long-term returns

Investing is all about the long term. Many professional investors are keen to bypass Omicron’s short-term hype.

One of them is Andrew Millington, head of UK equities at Abrdn fund manager. He says that companies with “strong balance sheets and pricing power are better at handling shutdowns and recessions and emerging in a stronger competitive position”.

He’s positive about stocks like online card supplier Moonpig and Pets At Home and financially flexible companies like National Express.

Millington adds, “None of us know what the new year will bring, but the world will continue to transform and great companies will find a way to succeed.”

This is wisdom that investors should hold on to as we navigate a tough few months.

Find deals in healthcare

It may seem obvious that healthcare stocks are a buy when the NHS is under pressure again and Covid is rising. But despite the consolidation, the stock market performance of this sector has been choppy lately.

This means that the ratings of some companies are attractive.

It might be a good idea to stay away from vaccine suppliers because their quotas are already very expensive.

The performance of the health sector stock market has been volatile lately

The performance of the health sector stock market has been volatile lately

Andrew Millington, Abrdn’s head of UK equities, likes many of the healthcare companies operating outside the coronavirus bubble – such as Abcam, Genus and Dechra Pharmaceuticals.

Ryan Hughes of AJ Bell Wealth Manager loves the investment trust of Worldwide Healthcare. “Confidence has suffered over the past year as a result of exposure to the Chinese stock market and the unfavorable biotech sector,” he says.

“But the expert team at OrbiMed healthcare professionals, who run the trust, must deliver long-term investment returns.”

The fund has generated a return of 41 percent in the past three years.

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