Investors may be feeling a cautious sense of optimism as we enter 2021 with global vaccine rollouts. Last year, technology companies and commodities were investment winners, so what will 2021 hold for investment markets?
There are three trends we see influencing ETF investments in 2021: the movement to value, thematic investing and short & leveraged investing.
Movement to value
As news of vaccines hit markets in late 2020, investors started to shift their approach away from a pure growth focus and towards value investments such as banks and industrials.
This trend is likely to continue in 2021 as investors anticipate a return to ‘normal’ and start to view growth stocks, particularly in the technology sector, as overpriced.
The Australian sharemarket is strongly skewed towards financials and resources, including companies typically falling into value investments. Investors could consider tailored Australian exposures such as ETFS S&P/ASX 300 High Yield Plus ETF (ASX Code: ZYAU).
Thematic investing with climate and biotechnology
Investors are increasingly interested in tailored investments accessing the growth themes of the future, as well as being able to invest according to their views and values. ETFs targeting specific themes should continue to be prominent in the coming year and investors are becoming more aware of how to use these as part of their portfolios.
While themes like virtual connectivity will continue to be popular, dynamics in the coming year should mean climate change and biotechnology will be focus points for investors.
Investors considering thematic investing may wish to look at ETF Securities’ Future Present Range of ETFs. Those specifically interested in biotechnology may consider ETFS S&P Biotech ETF (ASX Code: CURE). Alternatively, investors focused on renewable energy may consider battery technology which is a key supporter for the viability of renewable energy. ETFS Battery Tech & Lithium ETF (ASX Code: ACDC) is the only Australian-listed ETF to offer exposure to the global battery technology supply chain.
Short and leveraged investments
Across the volatility of 2020, many self-directed sophisticated investors took a short-term approach to trading and embraced short & leveraged funds. As the world continues to recover from COVID-19 and manages the ongoing tension in global relationships, use of short and leveraged instruments is likely to continue along with continued bouts of volatility.
Some sophisticated investors may anticipate changes in growth sectors like technology as the world opens again and choose short-term investments reflecting their views. For more information on the short & leveraged investments offered by ETF Securities, please click here.
Moving forward in 2021
The last year was unexpected and has shifted global investment behaviour and dynamics. The Australian ETF market will continue to grow and evolve to meet the needs of investors and if the past year is any indication, investors are looking for opportunities and increasingly using ETFs for their market exposure.