Looking ahead to a ‘new frontier’ for investors
The global health crisis is giving rise to a new wave of innovation and creating a number of promising investment opportunities
IF HISTORY IS ANY INDICATION, the coronavirus pandemic will lead to a new era of technological progress and economic opportunity. “A look at the last 100 years shows that deep disruptions give way to innovation that benefits households, businesses and investors,” says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank. Often, it’s the very disruptions — whether disease, war or depression — that pave the way for creativity and growth, he adds.
“As we look to the other side of the pandemic, we anticipate a period of renewal led by digitization, automation, new investment in health-care infrastructure and other drivers,” says Ehiwario Efeyini, director and senior market strategy analyst in the Chief Investment Office for Merrill and Bank of America Private Bank. For investors, Efeyini adds, “one of the main lessons from history is the importance of recognizing new trends that may be obscured by more immediate challenges.”
“We anticipate a period of renewal led by digitization, automation, new investment in health-care infrastructure and other drivers.”
— Director and Senior Market Strategy Analyst, Chief Investment Office, Merrill and Bank of America Private Bank
Innovations of the past
People living through World War I and the start of the Spanish Flu pandemic in 1918 may have seen little cause for optimism, says Efeyini. Yet, he points out, those events spurred sweeping advances in telecommunications, manufacturing, media, arts and entertainment. From 1920 to 1929, global GDP grew at 4%1 per year and stocks on the Dow Jones Industrial Average produced annualized returns of 21.2%.2 Similar recoveries followed shocks such as the Great Depression and World War II, the attacks of 9/11 and the global financial crisis of 2008‒09.
What’s likely ahead after coronavirus?
Similarly, the challenges of the latest pandemic may lead to more automation and robotics in everything from manufacturing to retail, transportation, agriculture and food production, Efeyini says. “As one example, a renewed emphasis on hygiene will favor robots over humans in packaged food preparation.” We’re also likely to see greater use of medical technologies that support remote patient diagnosis and monitoring. And cloud computing adoption should grow due to increased reliance on telecommuting, distance learning and the need for ever greater data storage. Other areas of innovation include online retail and genomics, including advanced techniques for treating diseases.
Potential opportunities for investors
These developments may present long-term opportunities for investors in areas such as health-care technology, biotechnology, pharmaceuticals, information technology and systems software, Hyzy believes. Other promising areas include communications services, internet and direct retail marketing. The new era favors large U.S. companies, he says. And while a well-balanced portfolio includes a variety of stocks, bonds and other assets, “a higher than traditional exposure to stocks will, in our view, position investors to potentially benefit from this new frontier.”
1 Average of U.S. and Western Europe. Equity return is Dow Jones Industrial Index price return to 1929 peak
2 Sources: Chief Investment Office, Maddison Project Database, Bloomberg. Data as of 2020.
Important Disclosures
Opinions are those of the author(s) as of the date of this document (09/29/2021) and are subject to change.
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The Chief Investment Office (CIO) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions oversight and data analytics. CIO viewpoints are developed for Bank of America Private Bank, a division of Bank of America, N.A., (“Bank of America”) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S” or “Merrill”), a registered broker-dealer, registered investment adviser and a wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”). This information should not be construed as investment advice and is subject to change. It is provided for informational purposes only and is not intended to be either a specific offer by Bank of America, Merrill or any affiliate to sell or provide, or a specific invitation for a consumer to apply for, any particular retail financial product or service that may be available.
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