The market is following a different recovery path in 2021, despite being in the early-to-mid part of its cycle. Should you be investing differently too?
The coronavirus pandemic has potentially changed the world around us forever. Accordingly, investors have had to adjust to a new reality, and quickly, as 2020 marked the end of one economic cycle and the beginning of another.
Geraldine Sundstrom, manager of the PIMCO GIS Dynamic Multi-Asset Fund, has a catchy name for this: Cyclicality 2.0. This is based on the belief that the recovery from the pandemic will be a green and digital one, supported by recovery packages announced by governments from across the world.
"Climate, which was seen as a super-secular factor until now, has become very 'right here, right now'," Sundstrom explains. "In this recovery, over 70% of world GDP is striving for a CO2-free future. This is putting a lot of demand on certain commodities and this trend is much more structural and fundamental in nature than markets want to think."
This realisation has led the Fund to pivot more towards areas that Sundstrom believes will benefit from the recovery and a new economic cycle, such as robotics, renewable energy, and electric vehicles. But the outlook for sectors such as fossil fuels is quite different, she notes.