Optimism in the market - despite all the other bleak news
WITH the seemingly never-ending lockdown, it is sometimes very difficult to remain upbeat. New strains of the virus are being identified and there is some doubt as to whether these will be dealt with by the current vaccines, combined with the continuing high level of Covid 19 patients as well as the question mark over transmission by those who have been vaccinated, all add to the uncertainty.
In marked contrast to this bleak picture, many of the world's stock markets are booming. We have just seen the Hang Seng index go through 30,000 for the first time, for example, and the US Nasdaq index and the S&P 500 are both trading at record levels.
This can be partially explained by the fact that markets always look ahead, but there seems to be an acceleration in change as well.
The most obvious beneficiary over the past several months have been the technology stocks. The largest tech companies have seen their share prices rocket upwards as they positively benefitted from the pandemic and the massive move to working from home. This has, of course been the major driver behind the surge in the Nasdaq index.
Another development has been the increased attention on climate change and therefore the associated beneficiaries, Tesla being an obvious example. This growth in electrification is likely to continue, pandemic or no pandemic, and has clearly been given a boost by the new US President being far more attuned to the challenges of climate change.
One change that has certainly been accelerated by coronavirus is the trend towards on-line shopping and away from the high street.
Who would have thought that such relative newcomers as Boohoo and Asos would be in a position to take over high street stalwarts such as Debenhams and Top Shop? Yet here we are facing this very possibility.
There was already a move towards on-line shopping but there can be no doubt that it has been sharply accelerated over the past 10 months. Mergers and acquisitions are a substantial driver of the stock market and there seems to be no shortage of such activity at the moment.
Another feature has been the number of companies coming to the market: imminent new placings include household names such as Doc Martens and Moonpig; this is another sign of a healthy marketplace.
Such developments are helping to propel global markets forward and this has all been aided by the increasing internationalism pervading investment activity. The UK market has lagged its peers over the past year, but gone are the days when our portfolios were full of FTSE 100 companies: now you ignore international markets and alternative asset classes at your peril.
With the ready availability of information at our fingertips this is a trend that seems set to continue. The overwhelming message is that opportunities abound, especially when we are going through a time of such change even with the background of a global pandemic. These are exciting times for global development and for investors.
:: Cathy Dixon is a partner at the Belfast office of Smith & Williamson Investment Management. This article does not constitute a recommendation to buy or sell investments and the value of any shares may fall as well as rise.