Video Transcript
The new landscape: Investing in post-pandemic markets
Presenter: Veronica Willis, Investment Strategy Analyst, Wells Fargo Investment Institute
Investment and Insurance Products:
- NOT FDIC Insured
- NO Bank Guarantee
- May Lose Value
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Empty office workspaces like these are just one of the signs COVID-19 has upended our daily lives.
Working from home, as well as trends such as teleconferencing, telemedicine, and contactless payments, likely will have broader economic implications for the labor market, consumer behavior, health care, education, travel, and real estate for years to come.
Our response to the pandemic has reshaped the economy and global markets — accelerating certain market trends that were in place prior to the outbreak — and sparking new ones.
Monetary and fiscal policies have also had an impact. These policies have injected an unprecedented amount of liquidity into the global economy, and we believe some of these policies will remain in place until late 2021 or even, possibly, into 2022.
This fiscal stimulus has allowed firms to borrow low-cost capital. This allows for major investments in innovations, such as cloud computing, artificial intelligence, and machine learning in order to improve operations, expand online customer service, and reconfigure global supply chains.
The combination of massive liquidity and private spending on big-ticket items is leading to a rotation in equity markets. There is a shift away from growth and high-quality stocks that historically have characterized late-cycle markets, into a typical early-cycle recovery led by small-cap stocks, cyclical equity sectors, and emerging markets.
Furthermore, in this lower interest rate environment, we believe bonds will continue to struggle. Yet, pent-up demand makes us favorable on commodity investments over the coming 6–12 months.
Despite the many pandemic-related changes in the economy, not all of the recent trends will be permanent ones. For example, we think working from home likely will evolve from its current form to a hybrid model.
To learn more about which trends we believe will be the most impactful and what investors should consider in an effort to take advantage of opportunities, download our special report: “The new landscape: Investing in post-pandemic markets.”
Risk considerations
Forecasts are not guaranteed and based on certain assumptions and on views of market and economic conditions which are subject to change.
All investing involves risks including the possible loss of principal. Equity securities are subject to market risk which means their value may fluctuate in response to general economic and market conditions and the perception of individual issuers. Investments in equity securities are generally more volatile than other types of securities. Small- and mid-cap stocks are generally more volatile, subject to greater risks and are less liquid than large company stocks. Bonds are subject to market, interest rate, price, credit/default, liquidity, inflation and other risks. Prices tend to be inversely affected by changes in interest rates. High yield (junk) bonds have lower credit ratings and are subject to greater risk of default and greater principal risk. The commodities markets are considered speculative, carry substantial risks, and have experienced periods of extreme volatility. Investing in a volatile and uncertain commodities market may cause a portfolio to rapidly increase or decrease in value which may result in greater share price volatility.
Sector investing can be more volatile than investments that are broadly diversified over numerous sectors of the economy and will increase a portfolio’s vulnerability to any single economic, political, or regulatory development affecting the sector. This can result in greater price volatility.
General disclosures
Wells Fargo Investment Institute, Inc. is a registered investment adviser and wholly owned subsidiary of Wells Fargo Bank, N.A., a bank affiliate of Wells Fargo & Company.
Wells Fargo Advisors is registered with the U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority, but is not licensed or registered with any financial services regulatory authority outside of the U.S. Non-U.S. residents who maintain U.S.-based financial services account(s) with Wells Fargo Advisors may not be afforded certain protections conferred by legislation and regulations in their country of residence in respect of any investments, investment transactions or communications made with Wells Fargo Advisors.
Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company.
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