With vaccination drives well underway in many countries across the world, 2021 brings with itself hope of going back to the old normal and economic recovery. Some analysts do believe that global markets are pricing in vaccination but Morgan Stanley’s US Equity Strategist, Adam Virgadamo, believes that stock markets and the world is constantly evolving, creating “alpha opportunities” with the evolution. In a podcast, earlier this week, Adam Virgadamo listed out equity themes, as discussed by senior research analysts at Morgan Stanely from across the world, that investors should watch out for in 2021.
The first idea that Adam Virgadamo lists out is the change in global economic that the pandemic has ushered in. “We see a V-shaped recovery, but history tells us that every recession brings some economic scarring. Given the scale of the Great COVID Recession, this time will not be different and how we heal matters,” he said. With economic recovery gaining steam, government spending is expected to go higher. This is likely to translate to higher rates, higher inflation, and sharper and shorter business cycles, Virgadamo said. “All of that means higher volatility and a broader role for active portfolio management,” the equity strategist added.
2020 saw technology spends zoom as digital adoption trends accelerated. This helped technology firms gain. Adam Virgadamo said that the reopening would bring some wallet share reversion, but the winners of the previous year are not going to sit still. “We see opportunities in identifying how much 2021 spending patterns resemble 2020 vs. 2019,” he said. Further, in technology, 2020 saw robust demand for investment in artificial intelligence, automation, and industrial software as firm latched onto tech to become more efficient and save margins. Analysts at Morgan Stanley that this trend is just the beginning of a long-term story.
Morgan Stanley said that across their U.S. clean energy coverage, average enterprise multiples were up roughly 440% in 2020 while adding that 2021 may be the year for ESG investing. “We think that the power behind green investing and the common-sense investment approach of buying at lower prices mean that the market may embrace rate of change ESG investing and reward companies improving their ESG characteristics,” Virgadamo said.