Join our community of smart investors

A time of transition and tightropes

After the jubilation of vaccine day more than a year ago, the world entered 2021 feeling reasonably confident that humankind was on the cusp of beating coronavirus. We were savouring our release from the oppressive shadow of the pandemic. Alas it was not to be, and the newest variant of coronavirus has once again clouded our view of when we might at last enter the Post Covid Era. 

But it will happen. And if the end of a year is a suitable time to declutter portfolios and rethink strategies, the end of a pandemic is doubly so. The world is now a different place: people, governments and markets have been altered by the experiences of the past two years. We have acquired new habits and perspectives that will stick and continue to reshape daily life, and our attention has been focused on societal and environmental issues in a way it wasn't before.

Governments have been lumbered with the challenges of managing and paying down mountain-sized debts and of becoming medical advisers to the population (not always sticking to doctor's orders themselves). Markets have thrived in this environment – awash with money from central banks and new investors – and buzzing with hot sectors (tech, infrastructure, private equity), waves of new listings and bidding wars for the UK’s undervalued bargains. But they now face trickier times. Some investors, eyeing up high valuations, tighter monetary policies and the potential for Chinese contagion, fear a jolting correction or crash may be on the cards. RWC Partners' Ian Lance warns that behind the scenes there are some worrying portents: a recent chart from SocGen shows that almost a third of Nasdaq stocks have lost over 50 per cent of value from their 200 day peak. Yet among highly profitable companies, records are being broken according to JPMorgan. It says that in spite of all the pressures its global team expects the companies it researches to deliver around $2.9tn (£2.2tn) of profits this year, compared with pre-pandemic time when a "pretty strong year" would deliver profits of $2.3tn. 

London’s weaknesses have been exposed - its lack of tech stars and damaging addiction to dividend payouts. More broadly the virus has triggered new problems: supply chain issues and the return of an old complaint, inflation. Policymakers are walking on a tightrope here. They have to weigh up persistence against transiency (Neil Shearing at Capital Economics points out that temporary energy hikes alone account for around six tenths of the rebound in inflation this year) and also the harm that any cures could do.

The pandemic has highlighted the importance of megatrends, such as demographics, technology, robotics, healthcare, infrastructure and the one that will dominate for decades until danger has passed, climate change. Yet the transition to a safe, green economy is the one trend that is especially difficult to navigate, as Mary McDougall explores in her article on assessing the greenness of your portfolio.

There is no better time therefore to cast an eye over your portfolio and to assess its suitability in the face of these headwinds and opportunities. Equally important is how it meets your own goals: is your portfolio fit for any one or all of these purposes? The aim of feature-packed end of year special is to help you pick a path through the remainder of the Covid era and to spot lasting trends and profitable opportunities over the next few years. We've assessed the outlook for all the major asset classes and regions, and presented the views of expert fund managers on the markets they know best. Our new Investment Trust in the Spotlight feature makes its debut. There’s also a chance to win a set of Harriman House's best-selling investing books in our Quiz of the Year, suggestions for investing-themed films for viewing from our new deputy editor Dan Jones, and a lesson on why it pays to invest in knowledge and data from analyst Steve Clapham.  

Our next issue will be published on 31 December (there will be no issue on 24 December). Until then I wish every one of you all the best of the festive season.