We’re almost done with COVID, at least for now.
The US has recorded a little over 16,500 new cases in early July. That’s 95% lower than in January of this year.
Almost half of the US population is vaccinated by now… and all 50 states are either lifting or easing restrictions.
Now, we usually are talking about trillion-dollar megatrends… and believe us, there are several of them unfolding as we speak.
The post-pandemic life will unleash these trends and provide plenty of opportunities to profit from them.
Trillion-Dollar Trend #1: Discretionary Spending
Americans saved about $2 trillion dollars during the pandemic… and they have started spending this money on everything, from champagne to travel.
This trend will continue for years. In 2024, total US spending will soar to $6 trillion per year, from the current $4.8.
Consumer discretionary is one of the categories that will benefit from this trend.
It includes such goods as high-end clothes, leisure and entertainment, durable goods, and others.
For example, car sales soared by 49% in the first quarter of 2021, compared to the previous one. Spending on goods overall was up 26%.
Some of the habits from the pandemic will likely stay—and they could drive certain product categories in the future:
- 54% more home cooking compared to pre-pandemic levels has the potential to drive grocery sales in the coming years;
- Remote learning soared by 120% globally. People are learning new skills, which will help them find new jobs and earn more money. As a result, they will spend even more.
- 39% of people are reading more online news. The media and entertainment industry emerged as one of the biggest beneficiaries of the pandemic.
An ETF tracking this group of products, Consumer Discretionary Select Sector SPDR Fund (XLY), soared by 13% so far this year.
But not all stocks in the consumer discretionary sector are in this ETF.
In fact, the pattern of spending we’re seeing now benefits medium- and small-cap stocks.
There are a lot of so-called “growth” stocks in this group. And as the economy grows, so do their sales. We have focused on the highest-growing sectors of the global markets in the past. The world recovering from a pandemic craves these products. These companies should be on every investor’s radar.
Trillion-Dollar Trend #2: The Cloud
As the world moved to working from home, enterprises moved to the cloud. Instead of having their corporate systems set up locally, they are now renting server space from big providers like Amazon and Microsoft.
Security is one benefit; costs are another big driver.
And even though some of the offices see their employees return, the cloud is here to stay.
More than that, it is projected to grow by leaps and bounds. By 2028, it will be about four times the size it is now.
In 2030, it will likely be a trillion-dollar business.
This means that the companies working in this business will have a chance to capitalize on an enormous profit opportunity.
Some of them you know. Amazon, Google, Microsoft are big cloud providers.
But, as always, some of the best upside could come from the smaller players.
Which ones? We cannot provide investment advice here… but putting an ETF like Global X Cloud Computing ETF (CLOU) might be a good start. It’s up 29% over the past 12 months… and the outlook for it is quite bright, in our opinion.
Trillion-Dollar Trend #2: Sustainability
The post-pandemic economy is different from its own 2019 version. Billions of dollars went into investment funds that adhere to the environmental, social, and governance (ESG) standards.
Just in the first quarter of 2021, inflows into those funds hit $185 billion. That was 17% higher than a quarter ago.
In total, ESG funds now manage over $2 trillion.
This number will most likely grow as more investors understand that sustainable funds have the momentum their “dirtier” counterparts don’t.
There are plenty of ESG ETFs out there… but instead of recommending you consider one of them we’d suggest a better option.
As an individual investor, you likely hold a portfolio of stocks. Some of them could be more ESG-friendly than others. But how do you know which ones are the most responsible in all three ESG respects?
An online lookup tool like this one should be helpful. It will give you an idea of how the companies you hold compare to their peers in terms of sustainability.
Use it as part of your due diligence.
We hope that you benefit from this recovery, and we hope you and your family are healthy and well.
Thank you for your loyal readership,
The Financial Star team