Markets at the halfway point, in the second half of the year analysts advise investing in tech, healtcare and US stock exchange. But the uncertainty linked to a possible second wave of Covid-19 remains high among investors and there are those who bet on cybersecurity companies.
We are now in the second half of the year and, after the collapses in the financial markets in February and March, the stock exchanges began to recover from April, despite the Covid crisis not being behind it at all. Will it be a path that they will follow in the coming months? And what will the second part of the year be like? Analysts and strategists try to look to the future to understand the trend, but the analysis of the situation is not simple.
Market situation and forecasts for the second half of 2020
The recovery from March on was strong, so much so that many stock market indices, especially the American ones, have regained lost ground: since the beginning of the year the global Msci World index has fallen 4%, the American S & P500 has sold 4% while the Nasdaq 100 is again positive with a 14% gain.
Uncertainty is high because, at this stage, reasoning about markets means reasoning about Covid. Will there be another wave of infection in the fall? And how serious will it be? On closer inspection, these are the key variable that will move the lists in the second half of 2020. We have seen well in recent days with the sudden collapses following the dissemination of data on an increase in the number of infections that have risen in the US, Europe and China.
What do the stock exchanges expect on this front? The impression is that the markets are optimistic and have decided that probably a second wave, if it occurs, will not do much damage to the first.
However, there is nervousness and the eyes are also focused on fundamental data from the real economy. The profits trend in the coming weeks and months will make it clear whether the recovery will be more or less marked, “V” or “U”. This too will certainly be an aspect that will affect the mood of the stock exchanges. But before these points come back to the fore, the purely medical question of the pandemic will have to go into the background.
Best-performing asset classes and investments for the second half of 2020
In which sectors are there interesting investments for the second half of the year? The most important driver of the markets since the beginning of the crisis has been fiscal and monetary support from central banks, especially the ECB and the Federal Reserve: the market is flooded with liquidity and interest rates are very low. Therefore, focus on explicitly supported and low default rate assets such as investment grade credit and parts of the high yield bond universe.
What are the opportunities to invest in? In the equity sector, a central theme is that of technology, a strategic area in which growth, power to determine prices, cash flows, automation and the limited complexity of supply chains will be rewarding.
Opportunities also in many megatrends that have further developed with the Covid crisis, with changes that will last even after the emergency. For example, the increased use of online solutions will cause the company to be increasingly exposed to cyber attacks. The cybersecurity sector will therefore become a fundamental point of attention and to date this is not yet well understood by all companies.
At sector level, the hypothesis is that a continuation of recent dynamics is likely, with good performances for technological stocks linked to structural trends such as e-commerce and cloud computing: analysts advise to invest in Nasdaq, as per tradition in every crisis. Expectations are also performing well from the healthcare sector stocks.
The sectors most affected by the health crisis, such as aeronautics and leisure, present high risks but should benefit from a gradual return to normal and therefore are an opportunity.
Geographically, the hypothesis is that the US market may continue to outperform the rest of the world, thanks to a large presence of high growth companies in the US indices.