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  • Thematic Investing

    How Lockdown Trends Are Shaping the Future

    VanEck
    September 16, 2021
     

    The lockdowns brought on by the COVID-19 pandemic pulled forward many trends that were already in motion. Stay-at-home orders and business closures prompted unpredictable implications that have since affected all aspects of life, business and the market. Virtual life put pressure on people and businesses to adapt.

    Retail Investing on the Rise

    The pandemic and subsequent lockdown that led to the market crash in 2020 gave way to investment opportunities and a shift in the investor landscape. As the Dow lost 37% of its value from February to March, investors saw a significant drop in prices and took advantage of deep discounts to get into the market.The retail investor rose during this time, benefiting largely from these discounts, and continued to invest through lockdowns. Those who entered the market at that time experienced significant growth when the market rebounded. The stock market continued to go up, we believe partly because of unprecedented government stimulus, defying fundamental logic, which might have given more comfort in “gambling” with stocks. Strong retail investing persists in 2021; Google searches relating to day trading spiked in January 2021 as popularity in online investment communities expanded.Retail sentiment has strongly influenced markets in 2021, with certain names, mainly meme stocks, driven up earlier in the year, while having come down later in the year. This earlier conviction seen in retail investors demonstrates the importance of monitoring sentiment in the markets going forward.

    Crypto Adoption Reaches Institutions

    Cryptocurrencies gained more attention last year as life went digital, including payment processes, and market movements left investors looking for safer opportunities. Some saw crypto as a way to hedge against the market’s volatility, as cryptocurrency movements are typically uncorrelated to more traditional assets. Payment apps like Paypal adopted cryptocurrency to enter the space as all payments went cashless, and to provide more accessibility for users. Financial institutions have warmed up to the benefits of crypto, not only as a store of value, but also for the added security feature offered through its blockchain technology. Blockchain coding offers a heightened level of security and its complexity provides features that could help secure transaction data.

    Digital Connectivity at All-Time High

    With all aspects of life forced into a virtual setting, internet traffic saw a significant increase as many looked for entertainment online. General screen time increased with some surveys suggesting an increase to at least four hours per day for over 40% of certain user demographics, up from 21% of users prior to the pandemic.Many workforces converted to full remote models, conducting business meetings via Zoom, and teams had to find creative ways to connect with clients without in-person meetings. Converging home with the workplace resulted in challenges for some to maintain work/life balance, while others found that they regained more freedom in their day as commutes to the office were eliminated and work hours became more flexible. This shift has prompted employers and employees alike to question the necessity of office spaces, especially as the trying events over the past year and a half have placed greater emphasis on quality of life and well-being. Some are even considering leaving their jobs, as they reevaluate priorities and work/life balance to determine if they are happy in their line of work. As of April, 4 million Americans quit their jobs and another 27% have plans to leave their employer.4

    Digital connectivity surged among many social platforms including video gaming, as those stuck at home sought out a semblance of social life, quickly accelerating the growth of the gaming industry. Fortnite, a popular video game where users can communicate within the gaming platform, saw the number of daily active users more than double in 2020. From March 16 to May 23, daily active users increased from approximately 21,460 to 53,780.Fortnite also acted as a virtual space for entertainment where users could attend “live” online concerts. Entertainment was lost during lockdown, and performers explored alternative means to engage their fans and generate revenue. Platforms including Instagram and Twitch allowed entertainers to perform in real-time, while viewers experienced “live” music from the comfort of their home. The growth of this technology has allowed people to expand their reach to an even more extensive audience.

    Health and Healthcare Reform Take Priority

    As attention shifted to mental health, with gyms closed for most of 2020 and indoor activities limited with businesses shut down, the housebound population saw an opportunity to focus on fitness and well-being. People transformed living areas into workout spaces and some home gym systems went out of stock for months. Amazon, which typically provides abundant access to global sellers and supply, saw significant shortages in all fitness equipment. Revenue in health and fitness equipment more than doubled from March to October of 2020 to $2.3B, with increased popularity in brands such as Tonal, Mirror and Peloton.Fitness coaches and personal trainers adapted as well, taking their clients online and converting workouts to function in home areas with limited resources.

    Virus care and the vaccine rollout exposed gaps in the healthcare system on a mass scale. Initially, hospitals were entirely overrun, and patients suffered from insufficient treatment due to the novelty and rapid spread of the virus. About 30 million Americans were uninsured in 2019, pre-pandemic7, while another 3 million lost insurance coverage with layoffs during shutdown, adding to the burden of expensive and unmanageable healthcare costs.This has since provoked more healthcare reform discussions in an effort to provide accessible and affordable care.

    Innovation Keeps Businesses Alive

    On a global scale, businesses fell in line and adapted their models in order to endure despite lockdowns. Some survived via ecommerce and online efforts, while others, namely small businesses and service industry businesses like restaurants and hotels, relied on government aid or otherwise shut down. Taking business online allowed some previously offline businesses to maintain income, and with consumers now used to these modified business models, it is likely they will remain in effect to satisfy consumer expectation and demand. Some service-oriented businesses, unable to convert to a full online model, found innovative ways to reach clients. One example was distilleries: spirit sales tanked once restaurants and bars closed. Distilleries pivoted to start manufacturing a different alcohol-based product, hand sanitizer, which was in high-demand as consumers raced to stock up on all disinfectants to protect from the virus.Innovation during this time was key to success and survival.

    The return to business as usual is not expected to look or feel the same as it did pre-COVID. Digital connectivity has grown significantly, proving the efficiency of online communication and collaboration. COVID placed such focus on health and wellness that individuals, and some companies, have felt a shift in priorities, with more attention on quality of life. The rapid innovation seen over the past several months has changed the trajectory for business models and consumer expectations alike. As the economy reopens in the midst of new virus variants, these trends may persist as the new norm.

    DISCLOSURES

    Source: NPR (https://www.npr.org/2020/12/31/952267894/stocks-2020-a-stunning-crash-then-a-record-setting-boom-created-centibillionaire)

    Source: tends.google.com (https://trends.google.com/trends/explore?geo=US&q=day%20trade,day%20trading)

    Source: Virtual Capitalist (https://www.visualcapitalist.com/5-big-picture-trends-being-accelerated-by-the-pandemic)

    Source: CNBC June 2021 (https://www.cnbc.com/2021/06/22/what-to-know-before-quitting-your-job-as-part-of-the-great-resignation.html)

    Source: Statista 2021 (https://www.statista.com/statistics/1121978/daily-active-users-of-the-fortnite-app-during-the-coronavirus-outbreak-in-norway)

    Source: Washington Post Jan. 2021 (https://www.washingtonpost.com/road-to-recovery/2021/01/07/home-fitness-boom)

    Source: Healthcare Dive Sept. 2020 (https://www.healthcaredive.com/news/uninsured-rate-rose-to-92-in-us-last-year-pre-covid-19-recession/585316)

    Center for American Progress Mar. 2021 (https://www.americanprogress.org/issues/healthcare/reports/2021/03/11/497019/policies-improve-health-insurance-coverage-america-recovers-covid-19)

    Source: New York Times, Aug. 2020 (https://www.nytimes.com/2020/08/04/business/distilleries-hand-sanitizer-pandemic.html)

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    Cryptocurrency is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value, but it does not have legal tender status. Cryptocurrencies are sometimes exchanged for U.S. dollars or other currencies around the world, but they are not generally backed or supported by any government or central bank. Their value is completely derived by market forces of supply and demand, and they are more volatile than traditional currencies. The value of cryptocurrency may be derived from the continued willingness of market participants to exchange fiat currency for cryptocurrency, which may result in the potential for permanent and total loss of value of a particular cryptocurrency should the market for that cryptocurrency disappear. Cryptocurrencies are not covered by either FDIC or SIPC insurance. Legislative and regulatory changes or actions at the state, federal, or international level may adversely affect the use, transfer, exchange, and value of cryptocurrency.

    Investing in cryptocurrencies comes with a number of risks, including volatile market price swings or flash crashes, market manipulation, and cybersecurity risks. In addition, cryptocurrency markets and exchanges are not regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing. There is no assurance that a person who accepts a cryptocurrency as payment today will continue to do so in the future.

    Investors should conduct extensive research into the legitimacy of each individual cryptocurrency, including its platform, before investing. The features, functions, characteristics, operation, use and other properties of the specific cryptocurrency may be complex, technical, or difficult to understand or evaluate. The cryptocurrency may be vulnerable to attacks on the security, integrity or operation, including attacks using computing power sufficient to overwhelm the normal operation of the cryptocurrency’s blockchain or other underlying technology. Some cryptocurrency transactions will be deemed to be made when recorded on a public ledger, which is not necessarily the date or time that a transaction may have been initiated.

    • Investors must have the financial ability, sophistication and willingness to bear the risks of an investment and a potential total loss of their entire investment in cryptocurrency.
    • An investment in cryptocurrency is not suitable or desirable for all investors.
    • Cryptocurrency has limited operating history or performance.
    • Fees and expenses associated with a cryptocurrency investment may be substantial.

    There may be risks posed by the lack of regulation for cryptocurrencies and any future regulatory developments could affect the viability and expansion of the use of cryptocurrencies. Investors should conduct extensive research before investing in cryptocurrencies.

    Information provided by Van Eck is not intended to be, nor should it be construed as financial, tax or legal advice. It is not a recommendation to buy or sell an interest in cryptocurrencies.

    All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future results.

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