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2020 Midyear Outlook: Key Investing Themes for the Next 3 to 5 Years

Amid present-day market volatility, Wells Fargo Investment Institute outlines what investors should consider in the years to come.

A container ship is seen on a waterway.

The current economic recession is historic in terms of its depth, and it will impact portfolios far into the future. How should investors adapt in the coming years?

Here, Wells Fargo Investment Institute (WFII) previews the trends investors could expect to see over the next three to five years.

1. Consumption patterns are likely to change

Consumer behavior may turn much more conservative—with reduced debt levels, increased saving, and reduced or flattened consumption. To counter the risk of another economic lockdown, the U.S. government is likely to broaden its reach into the economy while consumers will change how they shop, and businesses will likely build flexibility into how they produce and distribute.

2. Businesses will reassess how to add flexibility while maintaining efficiency

Businesses will take steps to be more flexible about how they produce products, but global competition will maintain pressure to do so cost-efficiently. Some overseas supply chains are likely to reshore to the U.S.—but selectively, not broadly.

 

3. The coronavirus pandemic may continue to cause stresses globally


International economies are less equipped to deal with the pandemic and its aftermath. The largest economies (China and the U.S.) are likely to grow larger and more influential, which WFII believes should support the U.S. dollar in the years ahead. International opportunities may lie less in global or regional trends than in idiosyncratic national trends.

4. Government influence in the economy will increase—for better or worse

The federal government is expected to take a more active role in managing the economy, especially to encourage recovery and prevent future lockdowns because of pandemics and other global events. Wider government economic involvement poses certain risks for businesses and investors.

 

5. Health care will play an increasingly prominent role in the future

The pandemic is likely to accelerate trends already in place that increase the future importance of the health care sector of the economy. We believe that important potential investment opportunities will develop as health care systems expand even faster and build more flexibility to cope with aging populations and possible future epidemics.

What can Wells Fargo do for you?

Talk to us about crafting strategies for managing both sides of your balance sheet.

Wells Fargo Investment Institute, Inc. is a registered investment adviser and wholly-owned subsidiary of Wells Fargo Bank, N.A., a bank affiliate of Wells Fargo & Company.

Risk Considerations

Forecasts are not guaranteed and based on certain assumptions and on views of market and economic conditions which are subject to change.

All investing involves risks including the possible loss of principal. Each asset class has its own risk and return characteristics. The level of risk associated with a particular investment or asset class generally correlates with the level of return the investment or asset class might achieve.

Some of the risks associated with investment in the Health Care sector include competition on branded products, sales erosion due to cheaper alternatives, research and development risk, government regulations and government approval of products anticipated to enter the market.

Opinions represent WFII’s opinion and are for general information purposes only and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally. WFII does not undertake to advise you of any change in its opinions or the information contained. Wells Fargo & Company affiliates may issue reports or have opinions that are inconsistent with, and reach different conclusions from, this call.

This information is provided for educational and illustrative purposes only. The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. Do not use as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon.

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