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5 ACTIONABLE INSIGHTS FOR PRIVATE INVESTORS IN 2021

By Ben Hobson, Markets Editor, Stockopedia 

 

COVID-19 has been a wake-up call for businesses and investors alike. Few could imagine going into 2020 what a year it would turn out to be, with many private investors witnessing significant drops in the value of their portfolios.

But in the first month of 2021, confidence is bouncing back. One reason being COVID-19 vaccination programmes getting off to a good start, with Pfizer and BioNTech projecting up to 50 million doses could be produced before the end of the year. Suddenly, an end is in sight.

So, looking forward to 2021, what can investors expect from the market and the “new normal”? Ben Hobson, Markets Editor at Stockopedia offers some ideas about what we might expect…

 

#1 A gradual end to the dividend drought

Dividends were decimated in 2020 as the COVID-19 crisis forced companies to shutter regular payouts and conserve cash due to economic uncertainty. Government and central bank support have also been a lifeline for many businesses but have made it hard for them to hand money to shareholders.

While dividend cuts and cancellations will continue to wash through, expect to see improved clarity from Q2 onwards. Full dividend reinstatements will be a theme, together with a longer tail of slow, steady, ratcheting up of payouts as companies become more confident in their recovery.

 

#2 Uncertainty will make it a stock-picker’s market

We saw in 2020 that some stocks and sectors were able to prevail and even flourish despite, and even because of, the economic disruption and changes in consumer behaviour – on-demand entertainment, e-commerce and video conferencing to name just a few.

With the outlook for COVID-19 and the associated impact on the economy still uncertain in the short term, it remains the case that there will be big winners in the market. But careful selection will be needed to avoid backing the wrong stocks and sectors or those that have already reached their peak.
#3 Macro factors could conspire to push stocks higher

2021 will see the back of some uncertain economic factors that nagged markets in 2020.

The US Presidency is settled and a Brexit trade deal secured, and central bank stimulus and super-low interest rates look set to continue. Despite the ongoing COVID-19 disruption, a more benign global environment beckons, and that should be good news for investors.

 

#4 Quality will be a watchword

After nearly a decade in which Growth and Momentum strategies dominated equity returns, Quality came into focus in 2020.

High quality companies have historically tended to outperform junk companies in the stock market on average. Of course, this is an open secret, and high-quality companies generally become bid up to higher valuations over time. The trick is to find high quality companies at bargain prices.

The push for quality stocks in portfolios is likely to continue in 2021. Businesses with strong moats and solid balance sheets (particularly those on appealing valuations) are likely to find favour with investors looking to find the best performance and avoid the worst kinds of volatility that we saw in 2020.

 

#5 Small caps come back into fashion

UK small-cap shares (with market caps below £500 million) have swung in and out of favour in recent years and they’ve developed a bit of a bad reputation in places. But there is currently an argument that, as a whole, this is an under-valued area of the market that could spring to life under more positive conditions.

Traditionally a sweet spot for private investors, small-caps demand careful research because they can be risky, but solid returns are on offer to those prepared to do their homework. After all, most successful large-cap companies started at one time as small businesses.

 

Finance

HIVERA BRINGS REGULATORY RISK SCORING TO FINANCIAL SERVICES

Financial services Chief Risk Officers and Heads of Compliance can now, for the first time ever, visualise and mitigate the regulatory risk in their entire unstructured data estate, thanks to hivera, a new regtech platform for financial services firms, designed to bring regulatory risk under control.

A new platform from data solutions provider, Automated-Intelligence, hivera enables clients to observe their unstructured data, assigning a tailored regulatory risk score based on the financial services firm’s risk appetite to that data, and automating the identification and remediation of threats to help mitigate associated risks.

Demonstrate Control
An estimated 80 percent of all data is unstructured. Until now, due to the challenges associated with discovering, analysing and managing unstructured data, this has created a significant challenge for compliance professionals, who are under increasing pressure from regulators to demonstrate compliance against policies and regulatory standards over all of their data.

hivera solves this problem. It indexes text-extractable content, providing users with advanced search capability to categorise personal information and commercially-sensitive data through metadata, security, keyword, phrases, and regular expression pattern matching.

Meanwhile, through the hivera dashboard, firms are presented with a risk score which correlates to the regulations they are subject to. In-depth insights enable them to visualise and address key compliance and regulatory risks within their data, whether retention related, security-related or a matter of personal and sensitive data. Moreover, with its user-friendly reporting modules, compliance professionals can quickly and easily provide compliance updates within the organisation or to regulators.

Automate Regulatory Risk Mitigation

In addition to significantly reducing regulatory risk and minimising human error, the hivera platform also offers huge resource, time and cost savings through automation. This is achieved through the application of fully-audited polices to categorised data, which enables ongoing data compliance and remediation. Policies applied against categorised data can perform deletions or archiving according to organisational retention schedules.

“hivera is transforming how financial services firms view unstructured data,” comments Simon Cole, CEO at Automated Intelligence. “By providing greater visibility and control over their unstructured data estate, we’re improving data analysis, data privacy, data protection and risk mitigation capabilities of our clients.”

 

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Finance

FINANCIAL INCLUSION WITHIN DIGITAL PAYMENTS

NICK FISHER, GENERAL MANAGER, SALES AND MARKETING UK, JCB INTERNATIONAL (EUROPE) LTD.

 

The shift towards an economy that removes physical cash has long been on the horizon in many regions. Sweden is an example of a country rapidly heading this way. Two years ago, just 1% of Sweden’s GDP was circulating in cash compared to 11% in the Eurozone, and research by the Swedish Retail and Wholesale Council showed half of the nation’s retailers saying that they probably would not accept cash after 2025.

 

In 2019 in the UK, cash payments decreased by 15%, although physical money was still the second most frequently used method comprising of 23% of all payments. The Financial Inclusion Commission in the UK states that there are over 1 million people that do not have a bank account, and the World Bank estimates that there are some 1.7 billion adults globally that still lack access to a bank account.

 

The finance industry has collaborated over the years to develop various credit products for affluent communities. These customers are considered a lower risk. However, institutions should continue to prioritise the advancement of services to serve an audience which remains – ‘unbanked’. Research by EY showed that financial inclusion could improve GDP by up to 14% in more rural, developing economies like India, and by 30% in frontier markets like Kenya. While the positive reasons for fully embracing digital payments and eliminating physical cash are plentiful, including lower payment processing costs for the retailer and customer convenience, physical cash provides the ‘unbanked’ with the ability to function day-to-day with a legal tender.

 

To establish digital solutions for the unbanked, payment players should adopt an inclusive mindset. The race towards a digital cash society will naturally get closer to the finish line with the passing of each generation, but governments could lend a hand to the unbanked by encouraging financial institutions to sponsor organisations that provide legal quasi digital cash products. In my opinion, the financial industry has an important part to play in developing low cost solutions to support the unbanked with authentication tools – such as biometrics and risk tools to manage real-time credit risk reporting with anywhere accessibility.

 

In both developing and developed countries, QR codes can play a superhero role as they offer simple, low-cost ways of processing payments on basic mobile phones. In June last year, we collaborated with FIS to enable cross-border QR codes in the APAC region. The ‘Worldpay from FIS 2020 Global Payments Report’ found that digital wallets, at the time, accounted for 58 % of regional ecommerce purchases and were expected to reach almost 70 % percent by 2023.

 

In developed regions, we are issued with a formal identification when we are born, no matter our circumstances, and this comes in the form of a birth certificate or, later in life, a passport. This does not always happen in developing countries as resources are often limited. Yet, advances in biometric technologies, such as fingerprint or palm vein may offer a solution to the requirement for proof of identity to open a bank account or to create a mobile wallet. Biometric organisations, payment leaders and innovators, such as Google Pay and Apple Pay, have partnered to make this a reality, despite the initial cost implications for development.

 

In summary, understanding the reasons for why some prefer physical cash, and others prefer digital cash, provides holistic learnings to achieve a society that ultimately uses digital cash only. Empathy is paramount for building customer-centric commerce. For me, at least, a world without physical cash cannot be considered responsible, or fair, until everyone can be accommodated.

 

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