The train has not yet left the station: the trends of 2021 in the capital market
The policies of central banks, the inflows of funds, the stability of technology stocks and, of course, the takeover of the corona plague.
Thinking of investing?
It seems that it is not too late.
Market Fund with the review
Sunday, 24 January 2021, 01:01
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2020 is behind us.
Despite the corona crisis, for quite a few investors, it was an extraordinary year with very high returns when the S&P 500 rose more than 18%.
Many investors fear that they have "missed" the train and that the current price level is too high to enter the stock market.
The opposite is correct.
The corona plague intensified trends in 2020 and will continue and intensify throughout 2021.
The broad monetary policy of central banks cannot be ignored - a policy that maintains such a low interest rate on the one hand to ease the economy but causes investors to neglect safe bond alternatives The shares.
Another reason for the trend: the far-reaching government intervention, which has set significant budgets to help citizens and small businesses deal with the consequences of the economic corona crisis.
The rationale was to make the economy continue to operate and encourage consumption, but in practice, the inflow of funds permeated the capital market and is also a significant factor in the increases we saw in the stock market in 2020.
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With such a cash balance, the technology giants just keep accumulating power.
Clockwise from left to right: Mark Zuckerberg, Sundar Pichai, Tim Cook and Jeff Bezos (Photo: Official Website, -)
2020 was a record year for venture capital raising.
2021 is expected to surpass that
US start-ups broke another record in 2020, with more than $ 150 billion raised. The chaos created by the epidemic has sparked a demand for innovative solutions and digital acceleration - which has driven the pace of venture capital investment. The technological ecosystem continues to flourish at a rapid pace Global technology centers also against the backdrop of the ongoing economic and health crisis
The global epidemic has proven to be a catalyst for healthcare redesign.Regionably, venture capitalists have put a deep hand in their pocket to provide a record level of funding for medical startups in 2020. They focused not only In finding medical solutions such as vaccines and treatments, but also in the development of remote medical systems and products based on new technologies such as AI.The corona has proven the inefficiency of the existing health system in many Western countries and stressed the need to resort to tools such as remote medicine and lack of resources and alternative means. For personal care.The result is a sudden acceleration towards digitization systems and a desire to find new ways to leverage a wave of patient data.Health start-ups have raised $ 80.6 billion in 2020, compared to 53.
$ 7 billion in 2019.
Along with the reality dictated to us by the spread of the corona plague and made us recognize the need for digital databases, technological advances enabling human genome flooring have opened the door to finding long-term solutions not only to the current epidemic but to a number of other diseases.
Genomics not only has the potential to enable billions of people to live longer and healthier lives, but it may also revolutionize the medical world as we know it today.
The global genomics market is estimated at $ 16.4 billion in 2018 and is expected to generate about $ 41.2 billion by 2025.
Concurrent with the rapid development in investments in various health channels, closures around the world have increased the time we spend in homes and accelerated trends such as online shopping, work from home, increasing payments Digital and the growth of the video game market.
The recovery of certain industries was rapid and the profits of the companies that knew how to adapt to the new digital age that was created were not long in coming up significantly.
The momentum, in our estimation, will continue.
That is, even if this year we see the end of the epidemic with the vaccination of the global population, the train has left the station and the technological solutions that allow us to operate digitally remotely are expected to stay with us.
Not only that, it should be borne in mind that with the rising value of the US tech giants that grew during the epidemic and continued to accumulate such significant cash balances in their coffers, optimism is in full swing. The Hansdak index rose by over 43% during 2020. And it is not expected to stop any time soon. These companies that have become almost untouchable will continue to merge into smaller companies content that will bring them technological and competitive advantages. That is, here too the momentum we saw in 2020 will probably intensify in the coming year.
Digitization everywhere - including in sectors that have not dreamed of it
As a result of the spread of the corona, many businesses had to make significant changes in order to survive 2020. The industrial sector, which experienced disruptions in global supply chains and plant closures, had to not only deal with remote management of workers, suppliers and customers but also start operating primarily online.
While the online transition was relatively natural and simple in the high-tech industry and in a significant portion of the service-providing industries, the more traditional industries found it difficult to operate during the Corona.
Production was often frozen as it was not possible to allow workers to reach their place of work.
Inventory management has also changed as a result of the high uncertainty.
Thus, while the high-tech and services industries adapted relatively quickly to the new reality, the recovery of the traditional industries was much slower.
On the other hand, in all industries, the new reality required company owners to implement digital systems throughout the production and sales processes.
According to Mc Kinsey data from September in the US alone, 60% of products and services have undergone a digitization process - compared to 41% in December 2020 and only 34% in May 2018. The expectation is of course that the data by the end of 2020 will be even higher.
Not everyone in Israel and around the world has withstood the accelerated digitization process (Photo: Reuven Castro)
It is clear to us that this trend will not only continue to intensify in 2021 but will also reach other markets in the world.
With the increase in the level of security of company owners as a result of the vaccinations and additional government assistance, it is likely that smaller companies will dare more and invest more widely in digital processes.
Also at the government level by the way, we expect that quite a few budgets will be directed to the digitalization of the various health systems in the world.
Israel has starred in the global press in recent weeks - it is rapidly storing its population not only because of the number of large vaccine doses purchased for the population but also because of the country's ability to integrate the digital data of the various HMOs.
This is not the case in quite a few Western countries today.
Even Western countries that budget considerable sums for health (USA or Switzerland, for example), find it difficult to operate without a digital system that combines all the data of the population. This is in the city due to the fact that the data is in various databases etc.) and decision-making is done at regional or federal rather than in concentrated form.
in other words, current belief is that the process Digitlitzih accelerated expected not only to continue at -2021, but heroism and spread and seep in more traditional industries. as the economy recovers from the recession leads to virus - vaccine The corona virus is expected to drive demand and economic activity in the sector.
The nature of investors is changing and the investment mix is increasingly prone to equities
The apps available for trading on the stock exchange and the prolonged stay at home as a result of the Corona restrictions or unemployment - all of these have attracted new investors to the capital market: the investors of the younger millennials.
They lost the fear of change, and realized that it was much scarier to stay put than to lose money.
They recognized their ability and realized they did not want their money to continue to lie in the bank.
While millennials hold only about 9% of total U.S. assets, according to U.S. Federal Reserve data, the rate of growth in their assets between 2019 and the third quarter of 2020 rose by more than 21%. The growth rate of GenX (children 1965-1980) stood for comparison at that time at only 8%, and of the Baby Boomers at only 4.5%.
Young Millennials also take credit in a way we have not seen so far in recent years. That is, it accounts for over 40% of their total assets. This high level of leverage now indicates that the younger generation is now betting on the little it has, seeing the high volatility in the stock market as an opportunity, and at the same time mostly realizing that it can not rely on government assistance.
Millennials increase market footprint (Photo: ShutterStock)
We must remember that not only the lack of investment alternatives in solid channels has pushed many investors to take more risks.
It is also the policy of central banks which over time lowers interest rates in most countries of the world and the very expanding fiscal support of governments which push investors into more risky channels.
But it seems that the millennial generation is also changing the rules of the game - they are technology enthusiasts, learn the rules of the game quickly, are bold and do not hesitate to take risks in order to control their pensions.
Their presence was felt significantly in the stock markets in 2020. The prevailing assessment is that this year their presence will increase even more - as long as interest rates continue to be low, those young investors will continue to increase their debt level, take risks and try and increase their asset value.
Bottom line - the coming year is not only a source of optimism for new beginnings - but also seems successful for hope for recovery, daring and in our opinion - prosperity.
The author is the CEO of the Family Office Lucid Investments and the former CEO of a representative of one of the active foreign banks in Israel.
The consultant and / or the company has no personal interest and the above should not be seen as a recommendation for performing operations and / or investment advice and / or investment marketing and / or investment advice of any kind.
The information presented is for information only and does not constitute a substitute for advice. Consider the data and personal needs of each person.
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