Portland-based investment firm Arnerich Massena, an independent investment advisory firm specializing in private wealth management, endowment & foundation, corporate consulting services, and impact investing strategies, takes a look into 2021 to forecast some of the shifts and cultural changes that we think may affect the investment environment next year.
The firm’s predictions are not meant to be investment recommendations, but provide an interesting and relevant look into the overarching landscape and possible headline trends that could affect the future investment environment for everyone. “As we gratefully look forward to the end of 2020,” says co-CEO and co-chief investment officer Bryan Shipley, CFA, CAIA, “we hope that 2021 will deliver recovery in a variety of ways, helping us recover our economy, our health, and our positive outlook for the future. The prospects look good, with vaccines and treatments on the way to manage the pandemic and potential economic stimulus to bring the economy back to life. In this coming year of recovery, we are likely to see some macro trends continue to unfold while new micro trends emerge, many of them coming directly out of the challenges we encountered in 2020.”
Along with the publication of the 2021 Investment Trends, the firm also offers an accompanying podcast discussion featuring research analysts in a deeper discussion of these trends and their thoughts and insights around them. Listen to the podcast on SoundCloud or YouTube.
Making an impact
We came face to face in an unprecedented way this year with why significant change is needed in our environmental, social, and governance (ESG) approaches, with a pandemic, protests, wildfires, and extreme weather events. Interest in impact and ESG investing has already been expanding rapidly; in 2021, we are likely to see that interest grow exponentially.
While new attention will be paid to environmental issues, renewable energy, and healthcare, the “S” in ESG will likely receive the most notice as social justice comes to the forefront culturally. There is a nearly universal desire to address social imbalances, and that effort is currently underway as investors look for businesses that are women and minority-owned, that prioritize diversity and inclusion, and that are sensitive to racial and gender disparities. Some of the effort will be legislated, as with California’s new law that prompts corporate boards to ensure gender balance, while many other initiatives will be driven by demand from investors and consumers.
Energy will also be central to the discussion next year, with the Green New Deal on the horizon and a move toward achieving net-zero carbon emissions by 2050. New battery storage technologies, electric and hydrogen vehicles (and EV-charging infrastructure), energy grids and infrastructure, and innovations in renewable energy technologies will be highly sought after areas for investment and development.
Getting our health back
The COVID-19 pandemic has all eyes on healthcare: how our healthcare systems are managed, how public health is administered, and the science behind vaccines and treatment options. We anticipate that the rolling out of a COVID-19 vaccine will be essential to launching the recovery of 2021 and will hopefully come sooner rather than later. But whenever that happens, we are likely to see simultaneous growth in other areas of healthcare research and interest, from biotech advances to a new understanding of how humans interact with their microbiomes and viromes (the bacteria and viruses that coexist within the human body, often serving functions vital to our health and well-being).
Healthcare spending is likely to increase, both from a government more focused on public health as well as from an aging population, creating plenty of opportunities for investors interested in this sector. Also, keep an eye out for artificial intelligence-powered drug discovery, as pharmaceutical companies look to AI to sift through chemical compounds at lightning speed; for an increase in genetic therapies; and for growing research into 3D-printed medical devices and even 3D-printed biological organs for organ transplants.
A great migration
Healthcare is not the only area that the pandemic has forever altered. How we live and work has been drastically and suddenly transformed by the quarantines, as telecommuting becomes the norm for many workers. We are likely to see ongoing changes in how companies arrange their spaces and build their work environments. Additionally, there are also signs of regional demographic shifts, as many American workers move inward away from coastal areas to seek a lower cost of living as they no longer necessarily need to live where they work. Real estate trends will be impacted by all of these changes; look for development in shared office environments and a migration out of urban areas and into both suburbs and more rural communities.
The migration is also impacted by climate change and significant weather events as well. Drought, fires, and earthquakes across the West Coast, hurricanes in the Southeast, and winter storms in the Northeast may also drive the movement of populations toward inland communities. And with the nation becoming more divided politically, that may also play out geographically as families seek a political climate that is more aligned with their political stripes, in both directions.
Racing to e-everything
E-commerce has expanded exponentially as a result of quarantines; with people stuck at home and retail stores largely shut down, many more consumers have switched to online shopping. But that is only a small portion of a larger technological shift into the digital age. Infrastructure for 5G technology will bring more automation, the internet of things, and a rise in Big Data as a profound economic force.
In this environment, cybersecurity will take on a new level of importance, as individuals and organizations seek protection for all of their personal and financial information. Technologies for collecting, collating, and analyzing data at ever greater levels of detail are likely to become more ubiquitous, as businesses from all industries seek new ways to use data to gain a competitive edge. At the same time, consumers will see ever more refined marketing based on their consumption patterns and Google searches.
Even food is getting on the e-train, between food tech crafting new forms of “impossible” protein to how we access and deliver food from its source to our homes. We are seeing more and more food delivery services – not just having meals delivered from Grubhub and Uber-eats, but meal kits, meal subscription services, and direct-to-your door farm boxes.
E-commerce has opened the door to a much more connected global economy, but has also made us more reliant on a complex web of supply chains. Supply chain problems can be highly disruptive, opening the door to new supply chain risks for businesses. For investors, this creates a new business opportunity in supply chain management and merchandisers.
How we “do money”
You may have noticed an accelerating shift toward digital payment systems and a cashless economy; add to that an increased market acceptance of Bitcoin and other crypto-currency, and 2021 is likely to be a pivotal year in the advent of the Information Age. Building on this trend, central banks around the world are currently designing digital currencies that will redefine what money is and how it can be used. While making global transfers and payments cheaper and easier, particularly for the “unbanked,” a shift to digital currency could also disenfranchise populations with less access to technology and internet.
At the same time, as governments work to stimulate their economies post-pandemic, look for more discussion about Modern Monetary Theory (MMT) as a solution to unprecedented debt levels and an alternative to fiscal discipline. With automation and robotics changing the employment outlook and job landscape, we could see a push toward universal basic income (UBI), or at the very least an increase in public safety nets for the unemployed.
The pendulum points back to small
Small business has been decimated by the pandemic, with massive numbers of businesses forced to close down – many of them permanently – particularly in the restaurant, entertainment, and hospitality industries. The last several years has also seen massive consolidation, with record numbers of mergers and acquisitions. However, 2021 may be the year in which this trend begins to reverse, as market-dominating companies such as Amazon, Apple, Facebook, and Google face accusations of monopolistic behavior and a rising tide of lawsuits and antitrust enforcement actions that could cause a significant break in their price momentum.
A recovering economy could be highly conducive to the performance of small and mid-sized companies, whose stocks tend to be sensitive to changes in the market environment. The question is whether they will be able to find a competitive foothold, balancing out the multi-national conglomerates that have dominated much of the investment landscape in recent memory.
Whatever is headed our way in 2021 will be a welcome change from the chaos of 2020. We are hopeful that we are headed into a year of recovery, and are looking forward to the growth and opportunities that are evolving out of the challenges we’ve faced this year.
About Arnerich Massena - Founded in 1991, Arnerich Massena is a Portland-based independent investment advisory firm servicing endowments, foundations, charitable organizations, private clients, trust and estates, and corporate retirement plans. The firm provides traditional portfolio management and investing, as well as multi-family office services, for clients, and is also widely known for successfully investing in high-impact areas like water resources, sustainable agriculture, fisheries, healthcare, and clean energy technology. Arnerich Massena strives to be a business that exemplifies both corporate citizenship and professional service, and has received awards for its innovations in corporate philanthropy. More information is available at www.arnerichmassena.com.