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When 2021 starts, it will be another year in which I would say that many investments are expensive. On the contrary, the current outlook for the financial market next year is that it is better to invest than give up. When the stock market has rallied as it has, this automatically attracts more initial public offerings (IPOs), and the next year certainly also offers good opportunities to join new companies, where the share price will double shortly after the IPO.
When companies present their IPO conditions to the market, it is one of the situations in which an absolute price assessment based on common sense would not hurt. It is looking through the optimistic PowerPoint presentation of the company and checking the reality of yourself. This doesn’t necessarily include a major analysis of the industry, etc., but just a sensible consideration helps. It is crucial to assess how realistic the growth expectations of the company really are, perhaps the expectations are based on an unrealistic confidence in access to qualified personnel, or on a sales forecast that does not allow a single “no” from customers potentials. There are many variables to check, but with the number of IPOs likely to increase and prices to continue higher, a reality check is healthy.
Buying from companies through IPOs can be great and often expresses a desire to participate in investment opportunities “right from the start.” However, prior to an IPO, a company has typically already had several investors buying and selling shares during the growth process.
These first investments in companies are illiquid in a different way and therefore difficult to divest in a short time, I classify these investments within the group of alternative investments. This asset class has been well known to investors for many years and covers a wide range of different assets. Some investments are more alternative than others, including investments that require a lot of optimism. On the contrary, this is where quite interesting investment opportunities lie, and I expect the demand for investments within this broad category to continue to increase markedly. Part of the art in this field is to avoid overweight investments with excessively long maturities, despite the prospect of high returns.
Liquid investments
The opposite of alternative investments in a portfolio are liquid investments, such as typically listed securities. These asset classes, for almost all investors, will also make up the vast majority of the portfolio in 2021. But in the market, it is precisely these investments that have most often been evaluated, weighted, and returned to the seller or taken home. – It is difficult to find a supposed offer here, but of course they exist.
To go back to the relative comparison again, one of my assessments throughout this year is that Emerging Market countries explore a different economic pressure during the 2019 coronavirus disease (Covid-19) crisis compared to previous crises, therefore, the huge appetite of global investors to invest in emerging market countries will accelerate at a later stage.
I still hope that the big move will happen in the mid-first half of 2021, although this does not mean that global investors have neglected emerging market countries in 2020. One of the emerging market countries that always gets some attention is the Philippines. . The 10-year interest rate shot up during the Covid-19 outbreak in March and April, although interest rates are now lower than at the beginning of the year and bond issuance has not been affected by the Covid crisis. -19.
I view this as a sign of a healthy credit market and in 2021, a yield of 3.25 percent still looks attractive, which will likely be the case for broad emerging market bond mutual funds, where I expect increased inflows. in this asset class. I expect similar movements in the stock market in similar countries, and when an investor allocates to Emerging Market countries, the choice of currency exposure is important. Investors often have the option of investing in a so-called “hard currency” such as US dollars or euros. The alternative is to choose the local currency and thus have the exposure in the respective currencies of the Emerging Markets: 2021 will be the year in which the local currencies are my choice.
Peter Lundgreen is the founding CEO of Lundgreen’s Capital. He is a professional investment advisor with more than 30 years of experience and a powerful investment and finance entrepreneur. Peter is a columnist and international speaker on topics related to global financial markets.
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