Valentine’s day: six investments we love and hate

Love is definitely in the air this year. According to Finder, the comparison website, four out of five Brits (79%) plan to celebrate Valentine’s Day in 2020, up from 69% in 2018*.

We’ll also be splashing the cash more this year, with the average spend increasing from £28 per person in 2018 to £35 today*. While flowers are the most popular gift, jewellery – which comes a close second – gets a ‘higher approval rating’. Diamonds are forever, while flowers are not….

And when it comes to our investments, there are some definite favourites for 2020. Juliet Schooling Latter, research director at FundCalibre, takes a look:

Everyone loves…

Technology

Technology has been leading the stock market charge in recent years. Indeed, the sector has outperformed the wider market in each of the past seven calendar years** and is already 6% ahead in 2020***. It’s where many of the world’s most innovative and exciting companies can be found and, where it was once a specialist, niche sector, it now touches almost every area of our lives. While it can be volatile, long term I think this sector will continue to outperform.

Fund to consider: AXA Framlington Global Technology

Artificial Intelligence

Investors have a burgeoning romance with AI. Tipped to be a substitution for labour – alongside robotics – its application can increase efficiency and accuracy, as well as productivity. While some see it as a threat, it can actually be used very effectively alongside human employees and, in countries such as Japan, where the working population is decreasing, it can be a welcome solution.

Fund to consider: Smith & Williamson Artificial Intelligence

Having second thoughts?

Renewables

Having been a wallflower for some years, renewables got very popular, very quickly, as investors flocked to the sector seeking income and diversification. However, as central government support has become less necessary and energy farms have become more efficient, power prices have been driven down and the asset class has seen a sell-off in recent weeks. While this may lead to some structural challenges, with climate change now high up on the world agenda, I believe the long-term trend is firmly in place.

Fund to consider: VT Gravis UK Infrastructure Income

UK equities

Investors have been on an emotional roller-coaster with UK equities in recent years. Since the EU referendum in June 2016, uncertainty has shrouded the outlook of our home stock market. While many foreign and domestic investors have dumped our companies, however, their performance has been surprisingly resilient. In more recent months we’ve had a ‘Boris bounce’ but the market is still cheap and unloved. Today could still be a good entry point.

Fund to consider: Royal London UK Equity Income

Unrequited love

Japan

Seven plus years of Abenomics has been positive for the Japanese stock market and its economy, but the third of ‘cupids’ (Abe’s) arrows has not hit the target fast enough for impatient investors. For no good reason, the stock market lagged its developed market peers last year**. However, the combination of lower valuations and improving corporate governance, is a powerful incentive to have faith in this asset class over the long term.

Fund to consider: T. Rowe Price Japanese Equity

Europe

Its divorce with the UK now agreed – even if the final details are still to be ironed out – Europe has been suffering almost as much as the UK when it comes to Brexit uncertainty. Investors have taken money out of the asset class consistently over the past few years, choosing to ignore the diversity and opportunities still provided by the 44 country-strong continent. Home to large, successful global brands, as well as plentiful exciting small caps, to me investors are missing out by ignoring our nearest neighbour.

Fund to consider: BlackRock Continental European Income

*Source: Finder.com, 7 February 2020
**Source: FE Analytics, total returns in sterling, calendar years 2013-2019
***Source: FE Analytics, total returns in sterling, 1 January to 7 February 2020