Don’t forget to consider COVID vaccine losers: T. Rowe Price

Dodging the losers may be more crucial to 2021 investment than backing those stocks which are likely to win, according to T. Rowe Price.

There had been much speculation about which stocks would be the winners from the COVID-19 vaccine but less focus on those which could yet be hurt.

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In a multi-asset paper, head of multi-asset solutions, Yoram Lustig, and multi-asset solution strategist, Michael Walsh, described this as an example of “constructive destruction”.

It would also be important for investors to consider if they wanted to be in a passive or active fund as passive funds could mean they were exposed to concentration risk and wider systemic risk while simultaneously missing out on unique opportunities discovered by active funds.

The pair said: “The scale and speed of the economic contraction has created uncertainty about the shape and length of the recovery, as well as potential opportunities.

“In the current environment, when failures can lead to permanent losses, dodging the losers may be even more important than backing the winners.”

The pair went on to describe which types of assets could be the winners and losers in the future. This included healthcare and online commerce as ones which could do well while banks and physical retailers would be likely to still struggle.

“For example, in a world in which a global health crisis has resulted in people across the world having to work from home and self‑isolate, sectors such as health care, connectivity‑enabling technology, and online commerce could be long‑term winners. On the other hand, an economic standstill will negatively impact demand for commodities and transportation and will be challenging for banks and physical retailers,” they said.

“The virus may also mean that people work more from home, travel less, and maintain social distance from each other for an extended period. This may mean that some investments, such as commercial property investing in office space and capital allocated to airports, may suffer. Investors in such assets may need to reassess those holdings.”