2020 has made us think of how dependent we are as a human species on our environment. Despite the fact that humans enjoy superior intelligence to other animals, that does not mean that we are not exposed to factors that condition our coexistence and even our survival.
As Charles Darwin pointed out in the 19th century, adaptation to the environment is key to survival.
This also applies to financial markets, where the environment surrounding 2020 has been hostile, but some have adapted better than others.
As a consequence of this, the differences between industries have been accentuated, as we can see in the graph:
Cálculos realizados hasta el 16/12/2020. Fuente: Thomson Reuters. Elaboración Propia.
These fittest survivors of the pandemic are undoubtedly tech and health sciences, but for slightly different reasons.
Technology
First of all, we are increasingly dependent on technological tools to maintain our productivity.
In fact, last week we saw how a small shutfown in some Google services such as Gmail, YouTube or Google Meets, became world news and put not only the users of these services in difficulties, but also large companies.
Retornos hasta el 16/12/2020. Fuente: Thomson Reuters. Elaboración Propia
Medicine
Secondly, dalthough medicine and biotechnology did not have disproportionate returns in 2020, the importance of these types of industries for society has been highlighted.
In fact, many investors have started to invest in pharmaceutical or health-related companies since the pandemic:
Retornos hasta el 16/12/2020. Fuente: Lipper. Elaboración Propia
2021: A new environment?
It remains to be seen if the sectors that have benefited from Covid-19 during 2020 will also benefit from it in 2021.
A month ago we already saw how, with the good results of the clinical trials of the vaccine, the sectors most adversely affected by Covid-19 rose sharply in the stock market.
The rotation towards these types of sectors presents a great dilemma for managers, who face the dichotomy between technology, apparently expensive and with high multiples, and industrial sectors, which trade at much lower multiples.
Surely, during 2021 we will be able to see if the selfish gene inherited from the industrial sectors ends up becoming the best weapon for managers to achieve that alpha (or in the case of evolutionary biology, that survival) so desired in the industry.