Looking beyond the pandemic
Part one of our series looking at how investing and markets will be different for the rest of 2020.
When we wrote back in December that change would be the defining theme of 2020, we’re not sure any of us had the events of the past few weeks and months in mind.
But the immense challenges we have all faced this year also mean we have an even greater responsibility to help investors navigate the fast-shifting market landscape.
In this series, experts from across the Legal & General investment teams offer answers to some of the biggest questions for investors raised by COVID-19.
The unprecedented breadth, depth and speed of government responses to COVID-19 have helped to remove the risk of a liquidity crisis – one where banks are unable or unwilling to lend, much like they were in 2008 and 2009. However, these actions haven’t solved longer-term issues for companies. Put simply: not all business models will be viable in the future.
As a result, we see potential opportunities for investors to pick companies that may likely emerge from the pandemic as winners, while avoiding those without the flexibility to weather this storm.
We believe this divergence will also highlight the need for responsible investing over the months and years ahead.
The crisis has underscored some of the social issues that we must consider – not least income inequality and access to healthcare – as part of the broader analysis that underpins our investment decisions. Yet we must also not lose sight of other environmental, social and governance (ESG) concerns, such as climate change, which could in time wreak havoc on a similar scale or worse to that unleashed by the virus.
Resilient societies, resilient portfolios
Indeed, one of the common themes in this outlook is that we believe the pandemic has intensified a number of long-term trends that were already underway, from global digitisation to the rise of populism.
So when we are all able to venture out of our homes again, we will find a different world – but one in which many of the themes that we have been discussing for some time will still be central.
For those themes with ESG implications, we believe responsible investing can capture the opportunities, mitigate the risks and strengthen long-term returns for our clients. That’s because by using our investments to help make our society and environment more resilient to future crises, we are ultimately building more resilient portfolios for our customers.