Optimising flexible fixed income as inflation bites
Going across the full spectrum of fixed income to navigate an inflationary environment.
Consumption has lately been on the mend as governments and central banks roll out massive stimulus packages to help support businesses and consumers in the fallout of the global public health crisis.
Economic activities in the US, for example, reached the year’s low in April, and are recovering in the following months since1. With physical store closures and mobility restrictions, more people have chosen to shop online, as reflected in the rise of e-commerce sales and penetration.
High-frequency economic activities in the US1
Months of mobility restrictions have also changed consumer behaviours. Some new behaviours could be temporary while others are likely here to stay.
While the underlying health of the consumer is dependent on how governments are mitigating the fallout of the global health crisis, we believe fiscal stimulus could be masking the strength of the economy and consumption. Let’s consider the sectors that are less dependent on government support.
As the public health crisis keeps people at home for longer, more are interested in upgrading their spaces, and as a result the home improvement sector is emerging as a beneficiary amid such ‘nesting’ behaviour.
Sales of furniture, garden supplies and sporting goods are expected to continue to rise2.
Some changes are here to stay
Once mobility restrictions are lifted permanently, we believe some changes in consumer behaviour are here to stay. Pet owners have been spending more time with their pets through the crisis. Owning a pet, for example, could present a potential investing opportunity into sectors related to pet ownership in the long run2.
Pet ownership has been rising over the past few decades. Generally, companion animals are not one-off purchases, and pet ownership comes with responsibilities – the provision of food, medicine, vaccines and treatments. The trend of working-from-home has led to a sharp increase in the number of households owning a pet.
Consumption trend in pet care3 in the US
Sustainability and consumption
A growing number of consumers care about sustainability and this is driving their choices in terms of products. One example of this is the rising demand for electric vehicles4, which plays a critical role in reducing air pollution, and in addressing climate change.
With ongoing improvements in technical performance and cost reductions, consumers are increasingly likely to consider buying electric vehicles2.
There’s still more to come
Food delivery is also a growing trend5 and while the health crisis has accelerated the adoption of such services, we believe this demand is likely to persist, especially in the US, China and Europe2.
In the beverage sector, we can find growth opportunities in segments such as energy drinks. Even though people staying at home are not visiting the gym as often, they are still turning to energy drinks.
Functionality, a reduction in sugar, and natural and organic ingredients could also reinforce the demand for energy drinks.
Consumer preference for energy drinks6
Consumption appears to be on the mend and months of mobility restrictions have also changed consumer behaviours. Some new behaviours could be temporary while others are likely here to stay2. ‘Nesting behaviour’ and other demographic changes are increasingly opening up opportunities, often in the less obvious segments of the consumer sector.