18 Dec 2020
Cormac Weldon, manager of the Artemis US Select and Artemis US Smaller Companies funds and William Warren, manager of the Artemis US Absolute Return and Artemis US Extended Alpha funds
Capital at risk. This content has been prepared for professional investors only. All financial investments involve taking risk which means investors may not get back the amount initially invested.
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Bull points
Bear points
After what has been an eventful and volatile year for the US market, we see the opportunities for 2021 shaping up in different ways.
We think that there is scope for the pace of economic growth to surprise on the upside. More stimulus is on its way. Savings are high and provide some cushion for consumer spending, even if tougher times are still ahead.
Then there are inventories. Typically, there is a surplus during a recession. But this recession, while very sharp, has been short lived. The need to build up inventories will therefore bring a healthy dynamic to demand/supply as the recovery takes hold.
On the unemployment front, joblessness is already lower than anticipated. We clearly need to distinguish here between the types of jobs, however. We are cognisant that some jobs might have been lost forever as the crisis has accelerated some trends. For example, some retailers won’t survive. In other areas, such as hospitality, it may be a long time before the sector returns to pre-crisis levels. On the other hand, in more robust sectors such as technology and healthcare we expect numbers to pick up quickly and strongly.
Secondly, we are going to keep a close watch on consumers’ behaviour. It will be interesting to see, post-crisis, how quickly people will return to old habits. Shopping. Dining out. Travelling. Meeting in person.
There is no doubt that some trends have been accelerated by the lockdowns and staying at home. If e-commerce’s growth is estimated to have jumped ahead by two years, what will be the residual effect on the behaviour of consumers? Some consumers that didn’t shop online previously have come to realise the convenience and won’t change habits again. We have also seen people spending a lot more on their homes and physical goods rather than travelling or experiences. The pace at which some of these behaviours change back to pre-pandemic (or not) will be important and might provide some investment opportunities. On travelling, for example, people are likely to seek holidays after this period of stay-at-home.
On the business front, some habits might have changed permanently – the lower cost and convenience of video calls, for example. The increase in working from home will also have an impact on requirements for office space.
All of these will clearly be linked to the availability and uptake of vaccines. At the moment, there seems to be a rather optimistic scenario on the vaccination process, its adoption and efficacy. Any further delays in the re-opening of economies and the reduction of social distancing measures will create some volatility in markets.
Thirdly, we have had a change in government. The new administration has a different agenda to the previous one. Their (anticipated) lack of majority in the Senate will impair their ability to pass policies which are less market-friendly. The market is currently pricing a split Senate/House, limiting the Democrats to implement reforms. If the Democrats were to win the majority in the Senate, this would change the dynamic as they have an agenda of increased corporate taxes and regulations.
Where the new administration could make a difference is in green energy. This is an area where we could see some opportunities. We are anticipating the tensions with China will remain but be dealt with in a different manner than by the previous administration.
As we are positive on the prospect for an economic recovery, small and mid-cap companies that have a more domestic tilt should benefit even more from the pick-up in economic activity. Having lagged behind in terms of performance versus large caps, small caps trade at valuations that are attractive versus large cap peers. We feel that this area of the market is to be considered in 2021.
To find out more about the Artemis US Select Fund and its positioning visit the fund page at www.artemisfunds.com.
THIS INFORMATION IS FOR INVESTMENT PROFESSIONALS ONLY. IT IS NOT FOR USE WITH OR BY PRIVATE INVESTORS.
Artemis US Select Fund
The fund is a sub-fund of Artemis Investment Funds ICVC. For further information, visit www.artemisfunds.com/oeic. Third parties (including FTSE and Morningstar) whose data may be included in this document do not accept any liability for errors or omissions. For information, visit www.artemisfunds.com/third-party-data. Any research and analysis in this communication has been obtained by Artemis for its own use. Although this communication is based on sources of information that Artemis believes to be reliable, no guarantee is given as to its accuracy or completeness. Any forward-looking statements are based on Artemis’ current expectations and projections and are subject to change without notice.
Issued by Artemis Fund Managers Ltd which is authorised and regulated by the Financial Conduct Authority.
Artemis US Smaller Companies Fund
The fund is a sub-fund of Artemis Investment Funds ICVC. For further information, visit www.artemisfunds.com/oeic. Third parties (including FTSE and Morningstar) whose data may be included in this document do not accept any liability for errors or omissions. For information, visit www.artemisfunds.com/third-party-data. Any research and analysis in this communication has been obtained by Artemis for its own use. Although this communication is based on sources of information that Artemis believes to be reliable, no guarantee is given as to its accuracy or completeness. Any forward-looking statements are based on Artemis’ current expectations and projections and are subject to change without notice.
Issued by Artemis Fund Managers Ltd which is authorised and regulated by the Financial Conduct Authority.
Artemis US Absolute Return Fund
The fund is a sub-fund of Artemis Investment Funds ICVC. For further information, visit www.artemisfunds.com/oeic.
Third parties (including FTSE and Morningstar) whose data may be included in this document do not accept any liability for errors or omissions. For information, visit www.artemisfunds.com/third-party-data.
Any research and analysis in this communication has been obtained by Artemis for its own use. Although this communication is based on sources of information that Artemis believes to be reliable, no guarantee is given as to its accuracy or completeness.
Any forward-looking statements are based on Artemis’ current expectations and projections and are subject to change without notice.
Issued by Artemis Fund Managers Ltd which is authorised and regulated by the Financial Conduct Authority.
Artemis US Extended Alpha Fund
The fund is a sub-fund of Artemis Investment Funds ICVC. For further information, visit www.artemisfunds.com/oeic.
Third parties (including FTSE and Morningstar) whose data may be included in this document do not accept any liability for errors or omissions. For information, visit www.artemisfunds.com/third-party-data.
Any research and analysis in this communication has been obtained by Artemis for its own use. Although this communication is based on sources of information that Artemis believes to be reliable, no guarantee is given as to its accuracy or completeness.
Any forward-looking statements are based on Artemis’ current expectations and projections and are subject to change without notice.
Issued by Artemis Fund Managers Ltd which is authorised and regulated by the Financial Conduct Authority.