‘It’s always darkest before the dawn’**.
• Recovery is not ‘if’ but ‘when’… but it’s a big when.
• When is a good time to increase strategic exposure to tech and bio-tech equities?
At times of unprecedented public health crisis and extreme stock market volatility everyone is feeling pessimistic and anxious, says ETF Securities head, Kris Walesby.
“No one alive today has lived through a comparable pandemic unless they are centenarians but most investors have lived through a severe economic downturn, in fact so severe it was only exceeded by one period, namely the Great Depression.
“The Global Financial Crisis (GFC), which the Americans called the Great Recession’, began only 12 years ago and many current day investors look back and regret selling quality assets in panic and not accumulating quality companies/assets slowly but methodically through the immediate post-Lehman Brothers crash years.
“Generally agreed lessons from this period for investors include: 1. don’t sell quality assets in panic and at unreasonably low levels; 2. don’t try and pick the bottom; 3. consider slowly accumulating good assets at attractive prices and getting oneself positioned for the recovery, whenever it may come.
“Current outlook commentary appears to veer between a sharp V-shaped recovery curve to an extended U-shaped eventual recovery curve.
So, is this a time to consider exposure to Technology and Biotechnology sector?
“Even while tech stocks have been hit by market volatility, these are the same stocks we are dependent on to keep the economy running in the current crisis. These include internet providers, web conferencing, mobile, social media, online shopping – so these companies may actually benefit from the crisis in the longer term.
“Netflix has had subscription spike in areas particularly hard hit by coronavirus, while Amazon has actually had to hire more people to manage their warehouses to cope with increased demand for delivery. Netflix has also trialled a function to allow “Netflix parties” which is an excellent opportunity to battle social isolation.
“Biotechnology companies globally are racing for the solution – it’s a bit of a lottery as to who will manage first – but worth noting the following: Moderna started clinical trials on a vaccine this week and Gilead’s anti-viral medications are looking promising as treatments.
“Biotech has previously been considered quite a volatile sector but the current environment is an excellent demonstration of its value and importance. It’s fair to say in our increasingly global world, COVID-19 is not going to be the last time we have to take drastic measures to limit the spread of a pandemic virus and these companies have been positioned to step up quickly because of their ongoing work.”
ETF Securities provides investors who wish to invest in either or both of these sectors with a convenient, transparent and simple investment avenue via specialised ETFs.
“Our newly launched FANG+ ETF managed (ASX Code: FANG) provides Australian investors access to 10 of the world’s highest growth technology companies, namely: Facebook, Apple, Amazon, Netflix, Google (Alphabet), Alibaba, Baidu, NVIDIA, Tesla and Twitter.
“ETF Securities also manages a Biotech investment product, namely the ETFS S&P Biotech ETF
(ASX code: CURE).
“Both these ETFs in effect offer investors ‘innovation at a click’ and, importantly, without the tax and reporting hassles of owning US shares directly,” Mr Walesby said.
“As for the ‘dawn’, it can’t come quick enough for any of us, but consensus opinion seems to be its going to be fairly dark over the next three to six months, while ironically apparent progress made in China may possibly contribute to a ray of light,” he said.
**The English theologian and historian Thomas Fuller appears to be the first person to commit the notion that ‘the darkest hour is just before the dawn’ to print. His religious travelogue A Pisgah-Sight Of Palestine And The Confines Thereof, 1650, contains this view: It is always darkest just before the Day dawneth.
Source: Wkipiedia March 20, 2020
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