Five Trading Trends to Watch in 2021

Five Trading Trends to Watch in 2021

This article was brought to you by our friends over at ETF Securities Australia. The views and opinions expressed in this article are those of ETF Securities Australia and may not reflect the views of SelfWealth or its associates.

Before investing in any ETFs, you should consult the respective product’s Product Disclosure Statement, which will be available on the fund’s website.

Knowledge level: Beginner  Reading time: 8-10 minutes

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Investors are starting 2021 with cautious optimism as the world anticipates an end to COVID-19, but what actually lies ahead for markets? The investment winners in the year of the pandemic were technology companies, particularly FAANG and WAAAX stocks, along with commodities, including gold and silver. This year may look a bit different, highlighted by these five trends.

 

1. Global economic recovery from COVID-19

Approved global vaccines are now starting to roll out, but investors shouldn’t assume an instant return to normal. It takes time to vaccinate a population and many countries are still battling severe outbreaks. That said, there’s still much to suggest a positive recovery.

Governments globally have announced generous stimulus packages to revive economic activity. For example, the European Union has approved a package to raise 750 billion euros, while the US has proposed a US$1.9 trillion stimulus package.

Some countries are also considering or resuming broad-scale projects to further stimulate economic growth, with infrastructure one option to achieve this. For example, India, initially subject to one of the world’s toughest lockdowns, has forged ahead with its existing US$1.4 trillion infrastructure program. After being hit hard during the pandemic, it is now well positioned for the future.

Investors looking for exposure to an economic recovery are likely to already be well-exposed to Australian and US markets, so looking to areas like Europe, which is likely to benefit from stimulus programs and growing business and consumer confidence, may be an option.

Alternatively, investors could consider investing in countries like India to access economic growth as well as recovery using an ETF such as ETFS Reliance India Nifty 50 ETF (ASX: NDIA).

 

 

2. Low interest rates globally

Interest rates declined further in 2020 to support global economies dealing with the COVID-19 pandemic. The Australian official cash rate dropped to 0.1%, while the lower bound of the US Federal Funds Rate fell to zero. It is likely cash rates will remain low through most of 2021 to support recovery with the potential for increases late in the year.

Low interest rates may see yield-focused investors look outside of fixed income to ‘riskier’ asset classes, such as shares. Low interest rates also typically support commodities, such as gold or silver, because investors may look to these as an alternative to cash to store value and protect against inflation. Investors considering precious metals have access to a range of targeted ETFs on the ASX, such as ETFS Physical Gold (ASX: GOLD), Australia’s oldest and largest gold-backed ETF.

 

3. Movement to value investments

Investors tend to move away from growth investments like technology in periods of economic recovery or growth. As news of vaccines hit markets in late 2020, investors started to shift towards value investments such as banks and industrials. This is likely to continue across 2021.

The Australian sharemarket is strongly skewed towards financials and resources, which include companies typically falling into value investments.

As such, investors may look towards broad Australian exposures, slightly tailored cross-market exposures like ETFS S&P/ASX 300 High Yield Plus ETF (ASX: ZYAU) or sector exposures to refocus on value investments.

 

4. Thematic investing

Investors have been increasingly interested in the themes of the future in recent years and being able to invest according to their views and values. This trend is likely to persist in 2021.

Dynamics in the coming year, such as vaccine roll-out or renewed focus on climate change are likely to see biotechnology and sustainability-oriented investments appeal in 2021.

Investors interested in healthcare may take a thematic or sub-sector approach such as healthcare biotechnology through funds such as the ETFS S&P Biotech ETF (ASX: CURE).

Meanwhile, investors focused on climate change may consider the growing range of ETFs capturing sustainability, or alternatively consider battery technology, which is key to the viability of renewable energy. ETFS Battery Tech & Lithium ETF (ASX: ACDC) is the only Australian-listed ETF to offer exposure to the global battery technology supply chain.

 

 

5. Short and leveraged investments

Amid the volatility of 2020, many self-directed sophisticated investors took a short-term approach to trading and embraced short and leveraged funds.

There are currently seven exchange-traded hedge funds listed on the ASX covering Australia, US markets and the technology sector, each of which generated significant activity in 2020.

The popularity of these ETFs last year suggests we may see the range of investment products available in Australia continue to expand to support investing based on high conviction views.

 

Moving forward in 2021

Last year may have been unexpected but it has created some interesting themes for the coming 12 months, whatever else it may bring. Many investors used ETFs in 2020 for fast and efficient access to the market as it changed, and having discovered the ease of using these instruments, are likely to continue to do so in 2021.

 

For more information on accessing these trends through ETFs in 2021, please speak to ETF Securities directly using the details below.

To invest in ASX-listed ETFs or any other ASX-listed securities, join SelfWealth today for flat-fee $9.50 brokerage and no other account fees or commissions!

 

ETF Securities Australia Client Services

Phone +61 2 8311 3488

Email: infoAU@etfsecurities.com.au

 

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General Advice Warning

ETFS Management (AUS) Limited (AFSL 466778) (“ETFS”), is the responsible entity and issuer of units in the ETFS S&P/ASX 300 High Yield Plus ETF (ASX: ZYAU) (ARSN: 605 617 963), ETFS S&P Biotech ETF (ASX: CURE) (ARSN 628 037 105), ETFS Battery Tech and Lithium ETF (ASX: ACDC) (ARSN 605 617 490) and ETFS Reliance India Nifty 50 ETF (ARSN 628 037 856) (ASX: NDIA) (“Funds”). The PDS contains all of the details of the offer of units in the Funds. Any investment decision should only be considered after reading the relevant offer document in full.

 

ETFS Metal Securities Australia Limited (ACN 101 465 383) (CAR: 001274650) is the issuer of shares in ETFS Physical Gold (ASX: GOLD) (“the Company”). The prospectus contains all of the details of the offer of shares in the Company. Any investment decision should only be considered after reading the relevant offer document in full.

 

This document is communicated by ETFS Management (AUS) Limited (Australian Financial Services Licence Number 466778) (“ETFS”) for publication by SelfWealth Ltd ACN 52 154 324 428 (“SelfWealth”) (Australian Financial Services Licence Number 421789). This document may not be reproduced, distributed or published by any recipient for any purpose. Under no circumstances is this document to be used or considered as an offer to sell, or a solicitation of an offer to buy, any securities, investments or other financial instruments and any investments should only be made on the basis of the relevant product disclosure statement which should be considered by any potential investor including any risks identified therein.

 

This document does not take into account your personal needs and financial circumstances. You should seek independent financial, legal, tax and other relevant advice having regard to your particular circumstances. Although we use reasonable efforts to obtain reliable, comprehensive information, we make no representation and give no warranty that it is accurate or complete.

 

Investments in any product issued by ETFS are subject to investment risk, including possible delays in repayment and loss of income and principal invested. Neither ETFS, ETFS Capital Limited nor any other member of the ETFS Capital Group guarantees the performance of any products issued by ETFS or the repayment of capital or any particular rate of return therefrom.

 

The value or return of an investment will fluctuate and investor may lose some or all of their investment. Past performance is not an indication of future performance.

 

ETFS Reliance India Nifty 50 ETF:
ETFS Reliance India NIFTY 50 ETF offered by ETFS Management (AUS) Limited or its affiliates is not sponsored, endorsed, sold or promoted by NSE INDICES LTD and its affiliates. NSE INDICES LTD and its affiliates do not make any representation or warranty, express or implied (including warranties of merchantability or fitness for particular purpose or use) to the owners of ETFS Reliance India NIFTY 50 ETF or any member of the public regarding the advisability of investing in securities generally or in the ETFS Reliance India NIFTY 50 ETF linked to the NIFTY 50 Index or particularly in the ability of the NIFT Y 50 Index to track general stock market performance in India. Please read the full Disclaimers in relation to the NIFTY 50 Index in the Product Disclosure Statement.

 

ETFS Battery Tech & Lithium ETF:
The financial instrument is not sponsored, promoted, sold or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regard to the results of using the Index and/or Index trade mark or the Index Price at any time or in any other respect. The Index is calculated and published by Solactive AG. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards the Issuer, Solactive AG has no obligation to point out errors in the Index to third parties including but not limited to investors and/or financial intermediaries of the financial instrument. Neither publication of the Index by Solactive AG nor the licensing of the Index or Index trade mark for the purpose of use in connection with the financial instrument constitutes a recommendation by Solactive AG to invest capital in said financial instrument nor does it in any way represent an assurance or opinion of Solactive AG with regard to any investment in this financial instrument. Solactive AG will not be responsible for the consequences of reliance upon any opinion or statement contained herein or for any omission.

 

ETFS S&P Biotech ETF:
Standard & Poor’s S&P Indices are trademarks of Standard & Poor’s Financial Services LLC. “S&P”, as used in the term S&P 500, is a trademark of Standard & Poor’s Financial Services LLC (“S&P”) respectively, and has been licensed for use by ETFS. ETFS products are not sponsored, endorsed, sold or promoted by S&P, and S&P does not make any representation regarding the advisability of investing in ETFS products.

 

ETFS S&P/ASX300 High Yield Plus ETF:
Standard & Poor’s S&P Indices are trademarks of Standard & Poor’s Financial Services LLC. “S&P” and “ASX”, as used in the term S&P/ASX 300, is a trademark of the Australian Securities Exchange (“ASX”) and Standard & Poor’s Financial Services LLC (“S&P”) respectively, and has been licensed for use by ETFS. ETFS products are not sponsored, endorsed, sold or promoted by S&P or ASX, and neither S&P nor ASX make any representation regarding the advisability of investing in ETFS products.

 

Information current as at 18 January, 2021

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