The Reboot Trade

Markets have quietly accepted the second wave of Covid as a reality. They recognise this wave will go through its woes and leave behind a trail of damage. The loss in this wave will probably hurt more given the way it has spread, the damage it has caused, and the virulent way it took lives away. Nobody would have anticipated this, and the mood seems to be reconciled to acceptance of the stark reality.

Now, markets seem to be playing the rebound, in a repeat of what happened last year. But investors must be cautious as this year’s wave is very different and is likely to cause even more economic damage. The recovery will be very different and the impact on different parts of the economy will significantly vary from last year.

Investing beyond the rebound will give far better outcomes than betting on the rebound itself. Structural stories are still probably more attractive than the rebound trade. Investors will need to adapt their strategies significantly over the coming months as we see the trends change, economy recover, and normalcy return.

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