Reaping rewards during recovery

After more than a decade of outperformance for growth stocks, the market has tilted toward value as investors see potential for accelerated economic growth and rising interest rates during the post-pandemic recovery. However, a focus on value versus growth is likely misplaced, portfolio manager Amber Sinha says.

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“The value cyclical elements of the market have been stronger recently — I would say since November 2020,” said Sinha, senior portfolio manager for global equities at CIBC Global Asset Management, in a recent interview.

The Russell 1000 Value index is up more than 28% over the last six months, while the Russell 1000 Growth index has gained just over 14%.

But instead of debating the merits of growth versus value, Sinha’s advice for investors was “stick with high quality.”

Sinha, who manages the CIBC European Equity Fund and the CIBC Asia Pacific Fund, identified two categories of potentially favourable stocks: those hard hit by the pandemic that haven’t yet recovered and pandemic winners including information technology.

While tech stocks recently lagged alongside vaccine deployment and anticipation of reopening, Sinha expects pandemic-motivated changes that helped fuel the sector’s success will be permanent.

“Finding documents online or doing meetings virtually — I think these are changes that are to some extent here to stay, and a reopening of the economy won’t completely reverse them,” he said.

And because tech increasingly plays a bigger role in people’s lives, “it’s a sector that one should have exposure to,” he said.

Given recent performance, Sinha said he’s ready to invest in tech names he liked “even more aggressively.”

On the S&P 500 index, information technology is up nearly 75% over one year, and down about 5% over the last month.

Other investing opportunities include consumer stocks as pent-up demand gets unleashed.

“Savings rates have gone up through the pandemic,” Sinha said. “People really haven’t had … avenues to spend their money.”

Canadians have accumulated an average of $5,800 in savings as spending dropped over the last year. As spending resumes, travel is one industry that would likely benefit.

“Now that we have not one but multiple proven vaccines, we are trying to take baby steps back into that space,” Sinha said. That means focusing on companies that serve demand for domestic travel versus international, he said.

Other investing opportunities include health-care franchises and utilities, which would provide consistency in portfolios. “These businesses remain great — pandemic or no,” Sinha said.

This article is part of the AdvisorToGo program, powered by CIBC. It was written without input from the sponsor.