6 biggest trends to watch in 2021, and tips on how you can invest

As 2020 draws to a close, it has become  evident that the Covid-19 pandemic has dramatically altered everything we thought we understood, from global economies down to individual consumer behaviour.

How long will its effects last? Some believe it would likely be short-lived, others think certain economic and behavioural effects have been changed irrevocably. Almost all, however, will agree that a widely distributed vaccine will give global economies the shot in the arm that it urgently needs to recover.

Bluford Putnam, Managing Director and Chief Economist at CME Group, offers 6 big trends we should expect to see in 2021, when Covid-19 vaccines are widely available.

“The COVID-19 pandemic has had a major influence on every facet of life this year,” observes Putnam. “A vaccine is not an on/off switch, however, and life will not go back to the way it was pre-pandemic. Some pre-pandemic trends were accelerated and are here to stay. The financial damage was severe, and the recovery will not be even or smooth.”

6 biggest trends for 2021

1.      Work from Home

Putnam noted that the trend towards greater flexibility in work arrangements had already been in place before the pandemic, and the mandatory lockdowns merely accelerated it. “With a vaccine, white collar workers will go back to their downtown office towers, yet with much more flexible work arrangements and much less business travel, says Putnam.

“Headwinds will continue for downtown business districts, including restaurants and hotels, as well as less demand for office space. Once thriving downtowns will take time to adjust and re-invent themselves. Airlines will need to re-think the economics of permanently dampened business travel.”

2.      Online shopping

Likewise for online shopping, the move away from physical stores had been well underway before the pandemic hit, but Covid-19 sped things up dramatically.

“The trend away from brick and mortar stores was entrenched before the pandemic, but online shopping and home delivery received a major boost from the pandemic. This trend has accelerated in a powerful and permanent manner,” said Putnam.

“There will be a place for some physical storefronts, partly as showrooms for online shopping, yet many stores will never re-open. Commercial real estate will take years to adjust.”

3.      Allocation of consumer spending.

“Consumers will travel again,” Putnam surmises. “There is pent-up demand for tourism experiences.”

While consumption demand for home furnishing had been strong as many people were stuck in their own homes, Putnam also foresees a recovery in consumption demand for fashion and dining out, though not all restaurants will recover.

“With a vaccine, the desire for social activities may reignite spending on clothing and fashion,” he says.

“Restaurants will be popular again, but not necessarily in the same locations, given the challenges to downtowns and the opportunities in the suburbs. Climate permitting, outdoor dining will remain extremely popular, so new restaurants will be designed differently.”

4.      Lingering effects of financial distress

The transportation sector will unfortunately continue to take a hit, according to Putnam.

“Commuter railroads and transit systems are in dire financial condition. They will need massive federal assistance to return to pre-pandemic service levels, but the demand may not return all the way back.”

Putnam estimates transport companies will take between 3 and 4 years to recover from the effects of the pandemic, and retrenchments may be in the thousands without federal assistance, even with a vaccine.

5.      Inflation

With the increase in unemployment and fall in overall demand, central banks around the world expanded their balance sheets through increased government spending. This has led to worries of heightened inflation in the coming year, which may or may not be uncalled for.

“Assuming more fiscal stimulus and continued buying of government debt by central banks, there will be an open debate about whether inflation fires are being lit, or not,” says Putnam

6.      Globalization

The pandemic upended earlier trade tensions between US and China, with China now moving ahead in its post-pandemic economic recovery in an evolving world order.

“The pre-pandemic trade tensions were a headwind for global trade. The pandemic at first accelerated that trend as China shutdown. China, however, had the virus first and beat the virus first, emerging with a strong economic recovery and more influence in the changing global order,” said Putnam.

Covid-19 has also highlighted the importance of have multiple trade partners, as various trade links and borders were shut down with growing infection rates. “We are also seeing changes in currency payments reflecting the growing importance of trade diversification, with the euro catching up with the US dollar as payment currency,” he says.

“Without a doubt, 2021 will be a fascinating year of transition – and, we hope, recovery,” Putnam concludes.

How to invest in 2021, on Covid-19 vaccine news

With these 6 big trends in mind, here are two areas you may find investment opportunities in 2021.

1.       Gold and safe haven assets in 2021

As interest rates are likely to remain low in the near future, coupled with the $900 billion stimulus package passed by the US Congress, many investors could seek out gold, silver, and other safe haven assets once again, amid inflation concerns, and fears of new waves of infection from mutant strains of Covid-19.

On the other hand, other market watchers argue that mass inoculation could likely mean a rapid economic recovery as early as mid-2021, and the equities market moving ahead of gold prices.

The reality may well lie between the two extreme points of view, which translates into greater opportunities for investors to trade in the volatility.

2.       Changing fortunes in technology stocks in 2021

It is clear that technology stocks will continue to hog headlines in 2021, as economies gradually get their populations to inoculate, and then unwind their Covid-19 restrictions. That could also signal a shift in fortunes for different businesses, as reflected in the S&P 500, Russell 2000, and Nasdaq-100 indices.

Erik Norland, Executive Director and Senior Economist at CME Group, noted that the earlier uptrend on the Nasdaq-100 in 2020 had been due to the robust earnings growth for technology firms that provided technology which were essential to consumers staying at home.

The trend has started to reverse with the news of two or more highly effectively Covid-19 vaccines, and could continue into 2021.

“The S&P 500 and Russell 2000, with high weightings to firms that have been adversely impacted by the pandemic, have rebounded, while the Nasdaq-100 has underperformed,” observed Norland. “An end to the pandemic could also impact future earnings growth for firms that specialize in online delivery, social networking, virtual internet meetings and the like.”

Yet, mass inoculation plans are unlikely to be rolled out smoothly, nor could it be rolled out as comprehensively and quickly in other parts of the world.

The uncertainty of the road to economic recovery will provide investment opportunities for astute investors.

Investing in gold and indices with Micro E-mini futures and options contracts

Now that you have some ideas to trade in 2021, the next question you need to consider is how.

If you are looking to trade gold or index futures, consider trading CME Group’s highly popular Micro E-mini futures and options contracts. Sized at one-tenth of a classic E-mini contract, the Micro contracts allow you to trade gold, S&P 500, Russell 2000, and Nasdaq-100 index futures with less cash and lower margins.

Source: CME Group

In the month of November, 2.26 million micro e-mini contracts were traded on average per day, the best record for a non-roll month.

Source: CME Group

Asia-based investors set another new record within the month, with more than 265,000 contracts traded per day.

Source: CME Group

Average daily volumes (ADV) in 4Q2020 reached 2.16 million contracts at end of Nov, a threefold increase from, 2Q2019 levels.

Source: CME Group

The newly launched micro e-mini options have also seen a record 475,000 cumulative contracts traded since August.

From now till the end of 2020, investors can trade five CME Micro E-mini futures contracts for just US$1.50 in commissions per side per lot.

To enjoy this promotion, you will first need to be a Phillip Futures customer. Sign up for your trading account easily using MyInfo, receive your approval within a couple of working days and sign up for the US$1.50 commission promotion to get started.

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