Lockdown 3.0: will past lockdown winners prevail?

Will the winners of last year’s lockdown measures experience similar success this time around?

It is a case of déjà vu for UK investors, who find themselves embroiled in yet another round of strict lockdown measures as part of attempts to curb the spread of Covid-19.

But this time it’s different as the prevalence of the new and more infectious strain of the virus in the UK means that the government has reintroduced stringent lockdown measures – but this has not been emulated to the same extent overseas.

The FTSE 100’s response to ‘Lockdown 3’ was muted, as the tighter restrictions had already been expected. But will the winners of last year’s lockdown measures, which were adopted by more regions globally, experience similar success this time?

Richard Hunter, Head of Markets at interactive investor, says: “Expect more of the same from this time around, with the tech sector on course to benefit again from the increasing reliance on technology for work, entertainment and shopping purposes. As such, expect the likes of Amazon (NASDAQ:AMZN), whose shares rose 74% last year, to continue to benefit from the retail revolution.

“One difference this time around is that if it is possible for there to be any benefit from a third lockdown, it is that companies have a grasp of what to expect having become unwillingly experienced from the previous ones. As such, many of the costs previously sunk, such as the physical changes needed to be made in supermarkets or the generally accelerated move to online trading, will already be in place.

“The fact remains, though, that investment is for the long term. Identifying quality companies and then staying with them – ideally also reinvesting dividends to reap the rewards of compounding – remains an investment strategy which is both simple and well-proven.”

Fund ideas

Teodor Dilov, Fund Analyst at interactive investor, says: “We like LF Lindsell Train UK Equity. The portfolio is massively overweight in consumer defensive stocks, adding also the overweight in communication services, which boasts strong performance in 2020. The fund, managed by seasoned and talented UK equity manager Nick Train, is also underweight in energy - which could see demand fading again due to restrictions.

“While UK investors are notoriously known for home bias, global diversification remains key to avoid country-specific risk. We like Fidelity Global Dividend, which typically holds around 50 companies, which the portfolio manager Dan Roberts says enables him to balance conviction with diversification and to achieve a degree of capital protection in volatile markets. Despite being more defensive focused, the fund is overweight in technology.

“Technology may continue breaking records because of both ongoing communication and work purposes as well as investor sentiment for not losing out on momentum - even if demand for cyclical and cheaper stocks pick up. But after stratospheric rises, don’t bet the house on it – diversification is key.

Myron Jobson, Personal Finance Campaigner at interactive investor, says: “Life remains tough for many Britons, who once again find themselves living under strict lockdown measures in a bid to curb this dastardly new coronavirus strain. Guidance in relation to personal finances remains the same. At a time where millions remain on furlough and many companies have crumbled from the financial strain of the pandemic, it is important to ensure that your financial house is in order. This may translate to doing an emergency budget and cutting down on non-essential spending. Those who have fallen behind on household bills should contact their provider/s as early as possible to explain, and hopefully receive some support.

“It remains good practice to keep a rainy-day fund to tide you over when times are tough financially. Three months’ salary is a good role of thumb, and perhaps even better in these tough times, six.”