It’s a “K”! – Economic Recovery Re-Envisioned
In the last blog, we talked about the “Shape of the economic recovery and what’s next for investors”. We reviewed the L, U, V, W, square root, and swoosh shapes.
In reality, for investors the recovery in North America is proving to be K-shaped. After the downward plunge in March, recovery came fast and furious for select sectors of the economy including:
- Technology (e.g. Shopify, Apple, Microsoft, Alphabet/Google),
- Consumer Discretionary (e.g. Amazon, Etsy, Home Depot),
- Communications and Entertainment (e.g. Zoom, DocuSign, Netflix),
- Healthcare (e.g. Abbott Laboratories, CRISPR Therapeutics, Trillium Therapeutics, Moderna)
The remaining sectors have been on a downward path since the pandemic was declared. The downward line in the “K” represents all other sectors with the hardest hit being:
- Industrials (e.g. Caterpillar, Boeing, Lockheed Martin, General Electric),
- Financials (e.g. Bank of Nova Scotia, JP Morgan Chase),
- Energy (e.g. Suncor, Canadian Natural Resources)
Most importantly, what the following diagram illustrates is that there are opportunities – not necessarily in what’s currently booming, and maybe not yet in the sectors that are struggling most, but those diamonds in the rough – individual companies or sectors that are priced attractively and ready for growth.
Your Next Step…
It’s time to be really very clear on what you own, to understand the unusual risks of the pandemic and its economic consequences, as well as the unusual investment opportunities it is presenting. Understand your current position, rebalance and diversify as warranted. The future is bright on the other side of the pandemic. We just need to proceed wisely.
The information in this commentary is for informational purposes only and not meant to be personalized investment advice. The content has been prepared by Jan Fraser, Fraser & Partners Investment Services of Aligned Capital Partners Inc. (ACPI) from sources believed to be accurate. The opinions expressed are those of the author and do not necessarily represent those of ACPI.