2020 was a turbulent year for the investment industry. Strict lockdowns implemented due to COVID-19 pandemic resulted in a deep global recession, gravely wounding the world economy. No sector went unscathed. Stocks in the financial and energy sectors plunged, same with real estate and defensive sectors. The tourism and airline industries, in particular, were heavily impacted by the crisis.
Despite the uncertainties over the rollout of the vaccines, fund managers are seeing signs that the worst may be mostly behind us. Many are looking forward to the increasing number of opportunities that will present themselves in 2021, with the pandemic offering up new and thrilling ways for investors to prosper. The following are some of the sectors anticipated to draw in forward-thinking investors.
- Transportation
Expected to reach $7. 8 trillion by 2027, the global transportation services market is one of the sectors to keep an eye on for this decade. The United States and China will continue to have the biggest market share, estimated to reach $1.7 trillion and $1.6 trillion, respectively. Other significant geographic markets are Canada, Germany and Japan.
The transportation industry is also expected to benefit from the “green boom.” As governments around the world push for a green industrial revolution, stocks that are tied to a cleaner and better future are bound to show significant growth. Already, investors are putting their money to these sectors, anticipating long-term returns.
The green revolution is expected to be a global lifestyle that will continue long after the pandemic subsides. This transformation is expected to disrupt multiple industries, with transpiration undergoing the most change. More vehicle manufacturers are embracing electrification and hybridization of their fleet in their bid to stay relevant in the market.
In 2020, electric vehicle company Tesla earned $40 billion, gaining 300% in just 12 months. Meanwhile, Canadian “green” ride-hailing startup Facedrive’s high-profile acquisition of US-based Steer EV subscription company has positioned it as a multi-vertical trailblazer. It aims to expand its reach to North America and the rest of the world.
The ride sharing industry, currently worth $60 billion, will continue to grow, set to hit $85 billion by 2023. Frontrunners Uber and Lyft have already started their green revolution, targeting to have electric vehicles to account for 100% of their rides in the United States, Canada and Europe within the next ten years.
Billions of investments are also going into the urban air mobility ecosystem. Within 20 years, the market is anticipated to increase to $318 billion. The electric vertical takeoff and landing (eVTOL) is one of the sectors to watch. Developers like Astro Aerospace (OTC:ASDN, see full analysis here) and Volocopter are all gearing to launch their aircrafts mid- to late-2020s.
- Real Estate
While real estate was one of the worst-hit sectors due to the pandemic, realtors are seeing a resurgence at the end of 2021 after the successful rollouts of COVID-10 vaccine. Apartments are expected to lead the recovery, followed by retail and office property sometime next year. Consumers will also be taking advantage of the low interest rates for residential real estate.
The continuing trend of working from home and increased corporate acceptance for distributed workplace will be a boon for real estate in selected suburbs and high-growth markets. More people are anticipated to move to lower-cost locations as big cities lose their appeal with experiential amenities being closed.
Even during the height of the pandemic, the residential real estate has proven to be a resilient subsector. In the United States, a total of 5.64 million homes were sold. This is a 5.6% increase from the figures in 2019. Sales of existing homes also climbed – the highest level in 13 years. There is also a hike in new home sales as demand for larger, more expensive houses rises.
Meanwhile, the low mortgage rates and steadily improving job landscape are projected to raise confidence for first-time home buyers. Realtors also believe that the successful vaccine roll-outs will ease seller apprehensions. Overall, the housing market will continue to play a key role in the world’s economic recovery in the upcoming years.
- Banking
Another one of the worst-performing sectors since the pandemic hit, banks are projected to bounce back in the second half of 2021. With the world economy slowly recovering, thanks to the successful deployment of the COVID-19 vaccines, stocks are bound to pick up. Loan activities are also expected to increase.
When the global outbreak caused a recession unlike anything in history, shares of the biggest banks across the globe fell. Billions of dollars were set aside to cover the anticipated loan losses. In the United States, around $320 billion are predicted to be written off as credit losses in the next two years.
Interest rates also declined to all-time lows as central banks were forced to cut benchmark rates to near zero. This is expected to carry on until the end of 2023. Despite these hurdles, the financial outlook for this year appears to be stable. Stress testing also shows that banks are more than able to stay afloat while sustaining double the amount of losses.
To elevate customer engagement during the pandemic, banks around the world deployed a combination of digital banking and human interaction. Going forward, banks are expected to continue investing in customer-facing technology and deliver a seamless experience. The challenge is in retaining first time users of digital channels.
This year, expectations of higher economic growth, yield rising and buybacks are bound to drive shares higher. Already, bank stocks are up by 16%. Initial public offerings are also proving to be robust, with 53 new offerings raising around $21 billion worth of stocks. This can only bode well for big commercial banks like JP Morgan Chase, Wells Fargo and Morgan Stanley. Such a swift jump may cause investors to think that they have missed out on buying stocks while they are at low cost, but short-and long-term opportunities will still crop up. This is due to the changing market dynamics and other fundamentals. Investors will still have plenty of time to discern which financial stocks are best to buy in 2021.