It’s safe to say no one will be sorry to see the end of the first half of 2020, but what does the second half have in store?
With the reopening of the global economy following the coronavirus-forced shutdown and the U.S. presidential election just five months away, investors can expect more challenges but also opportunities, according to a report released Thursday by State Street’s SPDR business.
In the short term, the paper notes, the reopening of the economy, optimism about prospects for health solutions to COVID-19 and staunch commitments by policymakers have bolstered market sentiment.
“But, make no mistake about it, this temporary reprieve from fundamentals driving asset prices will likely end soon.”
Risk assets will have a hard time maintaining their momentum without economic recovery (“regardless of which letter of the alphabet it most resembles”), a reversal of job losses and a breakthrough on corporate profits.
Moreover, as the election nears, political headlines will generate more market-moving volatility.
The paper urges investors “with courage, capital and conviction” to look beyond the first-half devastation to opportunities in the post-pandemic environment.
It posits three themes for investors to consider in building portfolios.
1. Focus on Innovation
As reopening and rebuilding begin, new industries will be created and current ones will work to adjust to a new sociological paradigm, according to the report. This inflection point may present opportunities not currently well represented in traditional market exposures.