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Fidelity: These are the COVID 2022 consumer trends you could invest in

Posted: 3 June 2022 1:44 pm
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Changing consumer and business preferences during COVID-19 will continue, creating new opportunities for investors.

New behaviours learnt during the COVID-19 pandemic will continue, with this shift likely to create opportunities in key sectors, an industry expert reveals.

During Morningstar's investment conference, Fidelity's portfolio manager Paul Taylor highlights Australia's strong economic position and the opportunities in the current marketplace.

"If you look back through time, when interest rates start to go up it's usually a good time for equities, and the fundamental reason for that is because the economy is getting better," he said.

And while the economic backdrop remains robust, Taylor points to 3 sectors set to benefit.

The shift from goods to services

The pandemic saw goods soar while services collapse.

But this is unlikely to remain, with Taylor stating consumers are reverting back to services.

"We couldn't travel, we couldn't go to restaurants, leisure activities were significantly constrained during COVID. But now as we open up people are spending on services again," the analyst says.

"You can see flights are already incredibly busy, restaurants are full – we are social animals and we want to catch up with other people."

However, this comes at a time when consumers have less to spend due to inflation.

As such, Taylor highlights discretionary goods as likely to be the sector that suffers:

"When we look at the goods versus services argument, it just looks like there will be a squeeze on the [discretionary] goods sector while services will continue to grow."

Ecommerce continues to soar

The economy re-opening is unlikely to slow down the ecommerce switch.

In fact, consumers preferences are changing, with online shopping likely to benefit.

Highlighting that COVID just accelerated an already growing trend, Taylor points out that consumer preferences have now changed.

"As we come out of COVID, we might see [ecommerce] come back a little bit, but the trend is still there."

"People have gotten very comfortable, they have gotten into habits," Taylor explains.

While post-lockdown freedoms could see traditional retail spike, it is unlikely to be a long-term trend.

"Maybe we buy more in bricks and mortar stores in the short-term, but the longer-term penetration is still very much there," Taylor explains.

M&As set to continue, even with rising rates

In a low rate environment, mergers and acquisitions as well as initial public offerings usually rise, as the opportunities appear cheaper in a lower rate world.

So even though rates are set to soar up as much as 9 times in the US during this cycle, Taylor believes M&As will continue.

"With M&A, usually you need some kind of certainty," he said.

"As we start to see that we are bottoming out and we are opening up, that's when companies will take action. There's more certainty, they feel comfortable that we are living with COVID."

He also highlights certainty around interest rates will increase certainty, meaning companies will continue to act in the M&A space.

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