Have money set aside to invest, but not sure where you should put it in the year ahead to boost your returns? We look at five major investment trends that shouldn’t be ignored.
Trend #1: Inflation will make its first comeback
While, for the most part, growth is expected to return in 2022, we can expect higher inflation than in previous years because of an increase in energy, food prices and supply chain bottlenecks (supply not meeting demand). Labour costs are also increasing due to a skills shortage because of the pandemic, which is likely to push up the price of goods and services.
Investors should look for opportunities linked to an inflationary environment. Dean de Nysschen, a senior research and investment analyst at Glacier by Sanlam, recommends active managed fixed-income portfolios that can take advantage of instruments such as inflation-linked bonds, but are also active in managing interest rate risk, such as Amplify Strategic Income or SIM Active Income.
“Other asset classes to consider could be commodities and equities, which should be able to deliver real growth, especially those with strong moats (the ability to maintain competitive advantage over competitors to protect long-term profits) and brands that would be able to pass on higher inflation to consumers, or grow at faster rates than inflation,” adds de Nysschen. “A combination of growth and quality could work well here, and you could consider a fund like the SPW Global High Quality Feeder Fund.”
Book a meeting with a qualified financial planner today to ensure your investment portfolio is in line with your values, circumstances and risk profile.
Trend #2: Sustainable investing
By 2050 we should reach global net zero – a state in which greenhouse gases going into the atmosphere are balanced by removal from the atmosphere – but what will it take to get there? Companies around the world, including those in South Africa, will have to invest in various strategies to achieve zero carbon emissions.
Funds that cater to this trend are referred to as ESG funds, which stands for ‘environmental’, ‘social’ and ‘governance’. Sanlam has a variety of ESG funds to choose from. It offers access to the Sanlam Living Planet Fund in collaboration with and supported by the World Wide Fund (WWF), while Satrix has listed two new ESG ETFs (exchange traded funds): the Satrix MSCI World ESG ETF and the Satrix MSCI Emerging Markets ESG ETF.
Trend #3: The rise of disruptive technologies
The pandemic has hit most sectors such as hospitality, travel and entertainment, hard. Small businesses, especially those that have not embraced technology, have suffered particularly. However, many that have survived and thrived have embraced technology. One of the greatest transformations COVID-19 has sprung on the world is rapid digitisation – both at work and on the home front. Data from McKinsey & Company highlights how the world transitioned to e-commerce so rapidly that 10 years of e-commerce was compressed into just three months.
This is a theme that will be propelled well into 2022 and beyond, which is why investors should pay particular attention to how this will impact bricks-and-mortar business models. Smaller companies that are nimble due to technological innovation could offer good returns. De Nysschen recommends funds that invest in smaller companies, like the SIM Small Cap Fund, which solely invests in smaller, upcoming companies, with one or two exceptions.
Trend #4: Investing in alternative assets and infrastructure
Uncertainty and inflationary pressures could push investors to seek growth elsewhere in alternative assets such as commodities (gold, oil etc), private equity, real estate and cryptocurrencies. Alternative assets are well known as an attractive way to diversify and enhance your returns – especially during uncertain times. However, with alternative investments, it’s important to get clued up on on their uses, benefits and risks.
“Alternative assets can be accessed via the Glacier Invest Real Income Solutions (post-retirement living annuity solution) and the Glacier Invest Real Growth Solutions (for endowments and sinking funds specifically),” says de Nysschen.
Trend #5: COVID-19 and the healthcare industry
Emerging markets like South Africa will take longer to recover from the pandemic depending, in part, on how long the vaccine roll-out takes. There will therefore be a lag effect on stocks in certain industries that are reliant on getting the COVID-19 rates down, such as the travel, tourism and leisure industries.
Consider funds and stocks that could be linked to an accelerated roll-out locally. In the US, for example, pharmacies in the retail sector such as CVS are taking part in rolling out vaccines; local pharmacy retailers like Clicks are now benefitting in this way, too. Over the course of the past two years, we’ve also seen a surge in medical innovations such as digital assessments and diagnoses, online doctor’s appointments, virtual clinics and wearable medical technology.
These are some of the major themes that are likely to impact the investment landscape in 2022. If you are still unsure about where to invest, or how these themes could impact your current investments, contact a qualified financial planner who can discuss the major issues and how they can affect your capital and returns.
Article credit https://www.sanlamreality.co.za/wealth-sense/5-investment-trends-to-watch-in-2022/