Vaccine boost could see investors caught out by the 'Great Rotation'

Financial advisory firm boss says that the shift from growth to value stocks comes with risk

Vaccine boost could see investors caught out by the 'Great Rotation'
Steve Randall

Just a few weeks ago, a jab to end social distancing and mask wearing was still just a hope that we had all being holding onto since the spring.

But now, with several vaccines apparently set to drive the new ‘new normal’ investors are considering what that means for their portfolios. Specifically, is it time to pivot from the high-fliers that have boosted their wealth during 2020, towards low-priced stocks that may now see a resurgence?

Perhaps it would be savvy to remain a safe distance – we’ve all become experts in that – from these value stocks, according to the CEO of global financial advisory deVere Group.

Nigel Green says that recent days have seen a shift from stocks in firms that facilitate work-from-home towards more traditional picks such as industrials and financial services.

But he warns that the “Great Rotation” may be misguided and could catch out investors.

“They might be looking ahead to the post-pandemic era with a virus-free economy, but the world, the global economy, how we live, do business and interact remains fundamentally changed,” Green said. “It is doubtful the world will go back exactly to how it was pre-Covid – there are many aspects of the ‘new normal’ which people like and support.  As such, some of the major shifts are unlikely to be reversed.”

Don’t second guess the market
Green noted that business travel is one area that may never return to where it was as businesses embrace the positives of videoconferencing; and the surge in online retail is unlikely to be entirely replaced by a return to malls.

“Then there’s the use of apps for everyday tasks such as banking, also for healthcare and medical analysis, amongst many other things, he added. “In many ways, Covid-19 simply accelerated the growing trend that existed before towards consumer convenience, for 24/7 access, and on-demand.”

Green said that ditching the stocks of sectors powering societal change could be a mistake for investors, especially as the road to full vaccination will be a long one.

“The best way for investors to position themselves for the opportunities and to mitigate risks is to have a broad spread of investments, and not to try to second guess the market,” he concluded.