It is starting to look like Christmas from last year. The Grand Hotel has a tree, as does the park, with rumours of tighter lockdowns, restrictions, as Covid’s latest variant starts to get going. 

The jury is still out as to what new plot twists in the pandemic story will mean for investments and what actions we can take.

Should we be buying last year’s pandemic winners – from Peloton to Zoom – or should we be assuming that this latest wave will be short-lived and that stocks (especially travel and airlines) will recover?

Winter cheer: Experts tip Zoom, workout business Peloton, Apple and Just Eat as strong performers in the pandemic

Winter cheer: Experts tip Zoom, workout business Peloton, Apple and Just Eat as strong performers in the pandemic

Jason Hollands, the managing director of Wealth Platform Bestinvest is hopeful about a normal, fulfilling life. However, he believes there are many bargains.

According to him, ‘I do not see the possibility of another 2020 lockdown when a small group of winners was created and many losers.

“We’re now in a much different spot with both coronavirus vaccines, treatments and winding down of central bank and government emergency stimulus measures, recognition of the detrimental effects of economic lockdowns on the health of education, and vaccinations.

Look out for potential winners – and losers

Hollands optimism isn’t for everybody. Victoria Scholar, wealth manager Interactive Investor’s head of investments. 

She said that stocks in the hospitality and travel sectors had already been affected by rising Omicron concerns. Stocks such as IAG and easyJet could be under greater pressure if the new variant poses a threat to public health.

Ryan Hughes, the rival wealth manager AJ Bell’s investment director believes there will both investment opportunities but also risks in the near future. He says that there will be both investment opportunities and risks in the coming months. He also said, “The problem is that it’s a binary outcome. Different parts of market could do worse or better depending on whether more restrictions are implemented.”

He said that speculates about the possible outcome of a lockdown are dangerous. You can earn decent profits if it is done correctly. However, a bad decision could lead to short-term financial pain.

It is up to you how you react to the Omicron surge. Some investors will opt to do nothing – preferring to think long-term – while others will make slight adjustments to their portfolios. We offer some suggestions on where to place your investments in the midst of what may seem like an uphill battle for the next few months.

Stocks will gain when more people stay home 

With a ‘work from home’ order already in place, it is tempting to assume that we already know how the next few months will play out – and that includes how the stock market will react if the Government defies many of its own MPs and orders a lockdown.

The market plunged sharply in 2020 after lockdown was declared, but it has since recovered. There were some sectors that did well, and companies with products which reflected a locked-down lifestyle performed better than those in tourism or travel.

Companies like Peloton may benefit from another lockdown according to analysts

According to analysts, Peloton and other companies may be able to benefit from another lockdown.

Darius McDermott, managing director of investment platform Chelsea Financial Services, says that if – and it is a big if – Omicron leads to any kind of lockdown, we may see something similar in the short term.

He said: “The winners are tech companies and those that focus on stay-at home activities, such as Zoom or Peloton. Travel, leisure, entertainment, and hotel stocks will all be losers.

Scholar is in agreement. She said that ‘Omicron will likely benefit stay-at home stocks with Zoom. This was the most prominent child of the pandemic. It is expected to outperform governments that impose stricter restrictions.

“Food delivery firms such as Just Eat, Ocado and Ocado could see an upturn as more restaurant-style meals are being replaced by home delivery. Peloton is however less optimistic, as she argues that large-ticket items have been purchased by many customers.

Technology-oriented investors should thrive on the investment fund side. James Carthew from research firm QuotedData heads investment companies, and says that Polar Capital Technology is “a great long-term purchase”. 

Over the last three years, returns on this stock-market listed trust have been a staggering 17% Apple and Microsoft are among its largest holdings, with nearly three quarters of the investments made in America.

Chelsea McDermott enjoys Axa Framlington Global Technology fund. Over the last three years, it has delivered investors profits of 17%. Alphabet, Google parent Alphabet are the top holdings.

You should be ready to rally for bombed-out stocks 

It is possible that there are no further restrictions or that the regulations are so short-lived that they do not affect stock markets. According to investment professionals, there could be opportunities for bargains in areas that have been bailed out and will then quickly recover.

Hollands states: “If Omicron is not as dangerous as you fear, and that economies remain open,” then investors should look for sectors that can benefit from the ongoing recovery of the economy.

If Omicron does not turn out to be as dangerous as feared, companies like banks and mining giants may be a good investment

Omicron may not prove to be as hazardous as people thought, so banks and giant mining companies could still be worth a look.

“We mean financial institutions such as banks, mining firms and industrial giants that can pass on higher cost to customers and retain profit margins.

Some experts in investment believe that there may be a “value rally” where stocks which are currently below market value bounce back.

McDermott believes this is possible. ‘If a lockdown doesn’t happen, I suspect businesses in retail and entertainment will see sales dip as some people decide to stay away – we’ve seen this a little already over the past few days.

“But as market restrictions are limited, we might also see a quick-term rally in value.”

He suggests that he funds Ninety One Global Special Situations or Schroder Global Recovery if such an outcome occurs. The three-year returns for each are respectively 19 and 29%.

If you are sceptical about the markets, go for gold

Investors who are looking to put safety first in the future months will find shares and investment funds.

Dzmitry Lipski is the head of fund research at Interactive Investor and believes gold can be a viable option.

He says that gold performed better than equities during times of market volatility, extreme economic turmoil, and high inflation in the past. Fund iShares Physical Gold monitors the gold price.

Gold could be a good investment for those who wish to adopt a safety first approach

For those looking to take a safety-first approach, gold could make a great investment.

Investors could also consider Capital Gearing, a multiasset investment vehicle.

30% of the company’s assets are in US Treasury inflation-protected Securities.

These bonds provide protection against stock market declines and protect you from inflation.

The three-year respective returns on the iShares investment trust Capital Gearing and its investment fund iShares are respectively 35 and 26%.

Long-term returns can be found by looking beyond the crisis  

It is about investing for the long-term. Many professional investors prefer to ignore the Omicron noise in the short term.

Andrew Millington (head of UK Equities, Abrdn), is one of these people. According to Millington, companies that have strong balance sheets and price power will be able deal better with recessions and lockdowns.

He’s positive about stocks like Pets At Home or Moonpig Online Card Supplier, as well as financially sound companies such National Express.

Millington added: “We don’t know what 2015 will bring. However, the world is turning around and great business will succeed.”

This is a principle that investors need to remember as they navigate the next few months.

Find bargains on healthcare

While the NHS continues to be under stress and Covid is soaring, it may seem obvious that healthcare stocks should be bought. However, despite the recent booster rollouts, healthcare stocks have been volatile in the stock markets.

This is why some businesses are valued attractively.

It is a smart move to stay clear of vaccine suppliers, as they are highly-priced. 

The stock market performance of the health sector has been volatile of late

In recent times, stock markets performance for the health sector have been volatile

Andrew Millington, head of UK equities at asset manager Abrdn, likes numerous healthcare companies operating outside of the coronavirus bubble – the likes of Abcam, Genus and Dechra Pharmaceuticals.

Ryan Hughes, wealth manager AJ Bell loves investment trust Worldwide Healthcare. According to him, the trust’s struggles in the last year are due to exposure to China stock markets and an out-of-favour biotech sector.

“But, the skilled team at OrbiMed (a healthcare specialist) should produce long-term investments returns.”

In the last three years, it has earned a return on investment of 41%

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