Photographer: Anthony Devlin / Bloomberg
Photographer: Anthony Devlin / Bloomberg
Some of the world’s top money managers are betting on a post-pandemic spending boom that will propel real-world companies as economies reopen and people return to their normal lives.
Investors in Aberdeen Standard Investments Inc. and GAM Investments for UBS Asset Management are increasingly pouring money into companies where face-to-face interaction is the norm – things like travel agencies, restaurants, offline shopping and “consumer experiences ”.
“Many people are estimating that this will really lead to a new theme from the 1920s,” said Swetha Ramachandran, manager of GAM’s Luxury Brands Equity fund, referring to the growing views that post-pandemic spending will return to the excesses of the 1920. That was when euphoric consumers accumulated a surge in spending after the First World War and the 1918 flu pandemic. “There will be many peacocks” as people start to socialize, she said.
Investors began to accumulate cyclical stocks that benefited from an economic recovery at the end of last year, after good news in front of vaccines, as they withdrew from high-value technology stocks. Rotation accelerated as Treasury yields increased in mid-February. Now, with stimulus checks making their way in the United States – the beneficiary of half of the $ 2.9 trillion in savings accumulated globally during the pandemic – consumer actions are about to increase further.
Certainly, no one is saying that the pandemic is near. Europe faces a slow release of vaccines, with renewed restrictions on everyday life in some countries, while the seven-day average of new Covid-19 cases in the US has skyrocketed, showing that cases in the United States are increasing again and threatening a return to normal life. Scanning is here to stay – no retailer will ever return to a world of pure brick and mortar.
But a short-term shift to consumer discretionary stocks in November, when the “reopening” of the market became fashionable, has room to recover. A global energy share sub-meter is the best performance by sector since the end of October, with an increase of 53%, while the discretionary consumption index is only 17% higher.
In fact, the indicator for global consumer discretionary stocks is expected to return 17% over the next 12 months, according to data compiled by Bloomberg, while the S&P 500 index is expected to rise 12%.
“People want to travel. They want to see a family they haven’t seen in a long time. They want to go out with friends, ”said Donny Kranson, portfolio manager for European equities at Vontobel Asset Management.
Theme parks, airlines and even beer are back.
On the travel side, funds are betting on friendly hotels for stays like Marriott International Inc. and home-sharing company Airbnb Inc., theme parks like Six Flags Entertainment Corp. and even the Chinese online travel agency Trip.com Group Ltd, listed in the USA. ., based on interviews with Miller Tabak + Co., Scottish Investment Trust and AGF Investments Inc.
Marriott has gained 11% this year so far, while Airbnb, Six Flags and Trip.com have advanced 19%, 41% and 11%, respectively. They all outperformed the S&P 500 in 2021.
Restaurant chains like Cheesecake Factory Inc. and popular liquor brands in nightlife venues, bars and restaurants like Heineken NV, Anheuser-Busch InBev NV and Pernod Ricard SA, which distills Absolut vodka, are also at stake.
Large suburban shopping centers that have adapted and allow socially distant purchases are also expected to perform well, said Calum Bruce, fund manager at Ediston Property Investment Company.
Perhaps the biggest change that money managers see in consumer appetite as life goes offline is the “premiumization” of tastes in food, automobiles, cosmetics and clothing. Capri Holdings Ltd., owner of Jimmy Choo, in the United States, and more affordable luxury brands like the French SMCP, which owns the Maje and Sandro brands, are seen as benefiting if the reopening theme materializes.
Even the most sophisticated brands, such as Gucci’s owner, Kering SA, and China’s largest share, Kweichow Moutai Co., are mandatory as people do business, say some fund managers.
“In markets like China, strong premium trends are visible in segments such as beer, dairy, spirits, cosmetics, condiments, branded foods and four-wheelers,” said Shou-Pin Choo, Asian stock portfolio manager at UBS Asset.
– With the help of Suzannah Cavanaugh