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November 9th is a day Investors won't forget in a hurry. Especially the successful ones this year. Because that's the day everything changed.

What worked beautifully in Investment Portfolios - basically growth investing - through the year 2020, suddenly stopped working.

What were disasters (investment-wise) through the year, suddenly became stars.

What was positive news for the real world, was almost doomsday for most Asset Mangers!

The crowded long trades in the beloved “Stay-at-Home” tech stocks, the comfort giving Pharma stocks, and the other stocks that have made some of us look good, tanked. 

In India, even before the Pfizer vaccine announcement, right from the beginning of October, the trade had started to shift, away from the "comfort" bets to the beaten down ones.

And what could be more beaten down than Banks, leveraged financials, airlines, hotels and such sectors, that the virus singled out for special treatment.

In India, from October, more than 100% of the 12-13% upmove in the NIFTY was accounted for, by a single sector: Banks.

Yes, more than 100%. Everything else, in aggregate, contributed a negative 1.3%!

But what's even more interesting is this: across the world, the exact same phenomenon was noticed, even before the news of the Pfizer vaccine hit the ticker.

Let's take a look at what the best performing sectors across the world were in the past 30 days. 

Global Industries - Gainers (MCap Weighted USD Returns)

Industry

Oct  - 16th Nov 2020

1M

3M

6M

YTD

Oil & Gas Equipment & Services

25.30

21.90

2.23

28.09

-35.29

Regional Banks

20.86

13.23

13.94

38.80

-9.00

Hotels, Resorts & Cruise Lines

20.77

22.51

20.39

50.55

-30.83

Oil & Gas Exploration & Production

20.72

16.03

-4.46

10.81

-34.65

Airport Services

20.59

20.68

17.22

37.01

-12.43

Airlines

18.42

17.64

18.39

45.70

-27.60

Diversified Banks

15.48

10.58

8.35

22.57

-13.99

Oil & Gas Drilling

10.65

8.42

-11.05

-3.40

-51.71

Data Source: Bloomberg

 

Global Industries - Losers (MCap Weighted USD Returns)

Industry

Oct  - 16th Nov 2020

1M

3M

6M

YTD

Health Care Technology

2.13%

-4.42%

7.10%

24.58%

73.02%

Systems Software

1.59%

-2.03%

4.62%

18.58%

34.12%

Internet & Direct Marketing Retail

0.95%

-2.96%

6.05%

36.43%

55.58%

Application Software

-0.72%

-5.40%

8.47%

31.57%

35.14%

Internet Services & Infrastructure

-4.94%

-9.40%

-0.35%

18.76%

80.87%

Interactive Home Entertainment

-6.35%

-4.74%

-4.03%

15.68%

31.71%

Data Source: Bloomberg

  • The above two tables refer to market-cap weighted USD returns of global sectors (from 110 countries) with a minimum market-cap of $500M. It is evident from the data that sectors which were hammered due to the COVID-19 pandemic related shutdowns, such as Energy, Airlines, Hotels/Restaurants/Resorts & Banks (down 30-50% on average) led the last 30 days rally. 

  • On the opposite end of the seesaw, the Technology, Software & Online Retail i.e. star performers (up 30-80% YTD) were the biggest losers.

  • We observe that out of all countries, Europe had taken the most beating lately amid an emergence of second waves and lockdowns being announced left, right & centre. Hence, who would benefit the most from a COVID vaccine? Yes, you guessed it right, European laggards i.e. 

  1. Banks

Global Banks (MCap Weighted USD Returns)

Country

Oct  - 16th Nov 2020

1M

3M

6M

YTD

Ireland

52.00%

42.12%

28.96%

72.36%

-50.57%

Spain

46.24%

46.33%

25.48%

52.27%

-25.48%

United Kingdom

35.45%

32.28%

19.29%

23.15%

-34.92%

Portugal

33.55%

37.46%

-0.12%

32.98%

-44.96%

Belgium

33.30%

28.29%

11.63%

47.32%

-11.32%

South Africa

32.38%

34.68%

51.03%

83.43%

-26.24%

Mexico

28.30%

14.90%

23.78%

38.40%

-20.59%

Brazil

28.22%

23.49%

12.43%

48.21%

-41.48%

France

27.97%

24.68%

6.46%

45.40%

-26.95%

Greece

24.13%

34.88%

17.84%

54.06%

-54.81%

Thailand

24.76%

25.69%

10.27%

20.57%

-29.95%

India

23.08%

14.85%

26.25%

44.22%

-19.13%

United States

22.64%

17.07%

12.74%

38.37%

-20.76%

Australia

20.22%

11.68%

12.28%

50.33%

-6.81%

China

11.47%

3.85%

4.54%

9.32%

-4.99%

Japan

9.38%

9.70%

7.50%

15.49%

-10.33%

Data Source: Bloomberg

  • Globally, European banks led the rally, gaining anywhere from +30-50%, but are still down 20-40% YTD! As math dictates, if you lose 50%, you need to gain 100% just to breakeven.

  1. Hotels & Restaurants

Global Hotels & Restaurants (MCap Weighted USD Returns)

Country

Oct  - 16th Nov 2020

1M

3M

6M

YTD

Ireland

56.89%

60.57%

43.09%

63.06%

-23.11%

Spain

48.35%

56.00%

26.33%

39.18%

-27.62%

Germany

46.32%

54.41%

32.87%

73.42%

-54.38%

Sweden

32.99%

37.58%

20.51%

70.64%

-37.02%

France

30.90%

33.42%

25.45%

59.43%

-23.16%

United Kingdom

30.12%

24.49%

18.91%

52.61%

-17.87%

United States

24.63%

25.83%

24.88%

58.33%

-37.88%

Australia

15.98%

19.80%

53.65%

99.67%

-34.27%

Data Source: Bloomberg

  1. Airlines

Global Airlines (MCap Weighted USD Returns)

Country

Oct  - 16th Nov 2020

1M

3M

6M

YTD

United Kingdom

71.85%

69.86%

35.92%

72.36%

-54.04%

Indonesia

54.47%

38.25%

36.68%

51.94%

-36.28%

Finland

51.59%

66.75%

28.56%

17.56%

-41.59%

France

49.98%

46.51%

13.99%

21.56%

-53.70%

Canada

31.71%

32.71%

23.08%

57.70%

-53.85%

Australia

28.24%

27.56%

44.16%

77.21%

-23.81%

New Zealand

22.74%

17.61%

33.96%

61.26%

-40.98%

United States

20.09%

17.51%

23.76%

88.90%

-35.23%

Hong Kong

19.94%

11.02%

16.46%

-16.75%

-35.73%

Data Source: Bloomberg

  • A similar trend is observed amongst Hotels, Restaurants and Airlines, Europe & UK leads the way, with airlines still down 54% YTD even after the eye-popping 72% surge in the UK from the 1st of October.

So what does this tell us?

Well, the first thing it teaches us is that in Fund Management, portfolio management, asset management, no theme is permanent.

The best Portfolio Management Services companies can and will change their strategies, their asset allocation, a bit ahead of the change in trend.

Because in investing, what gives maximum pleasure, one day, gives maximum pain as well.

The other thing that we learn is that, markets are connected globally, and that having a global thinking and global outlook is invaluable even when doing single country investing because one is able to view the world as a giant Jigsaw puzzle with each piece fitting nicely into the rest. 

Therefore global investing cannot be divorced from local investing.

Investing globally and investing locally are joined at the hip.

Investing is one single science. In order to be a complete and consummate investment management company, one needs to be able to understand every single moving part in the world.

From the desk of 

Shankar Sharma & Devina Mehra

If you want any help at all in your wealth creation journey, in managing your Investments, just drop us a line via this link and we will be right by your side, super quick!

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