This infographic is available as a poster.

5 Trends for Investors to Watch Amid a COVID-19 Recovery

If history tells us anything, crisis forges change.

Like other pandemics throughout history, COVID-19 led to tectonic shifts in society, markets, and government policy. People and businesses are rethinking traditional work structures, while inflation concerns are rising amid trillions in stimulus injections. But what impact does this have on investors?

To answer this question, this infographic from New York Life Investments pinpoints five trends to watch amid a COVID-19 recovery.

1. Inflation

Today, investors are closely watching inflation. Core factors that influence inflation include:

• Increasing money supply
• Rising raw materials costs

Between 2020 and 2021, the money supply in the U.S. rose over 28%. Meanwhile, building materials and supplies, as shown through the producer price index, have jumped 44% between May 2020 and May 2021.

In fact, as of May 2021, inflation has seen its greatest rise in over a decade, with year-over-year figures increasing 5%.

The Opportunity

To hedge against potential inflation risk, investors can consider the following asset classes:

• Infrastructure
• Bank loans
• Gold
• Commodities
• Real estate
• Treasury inflation-protected securities (TIPS)

2. Innovation

How companies navigate digital disruption will likely affect their revenues and future operations. Notably, during COVID-19, companies that adopted new technologies saw higher revenues than their peers, according to one survey.

*Responses from 899 C-level executives and senior managers representing the full range of regions, industries, company sizes, and functional specialties. Compared to industry peers, time period is over three years.
Source: McKinsey, 10/05/20

The Opportunity

Frontier technologies have the potential to reshape markets and productivity both during and after a COVID-19 recovery. Here are among a few examples:

• Artificial intelligence (AI)
• Big data
• Internet of things (IoT)
• Robotics
• Solar photovoltaic (PV)

3. ESG

Environmental, social, and governance (ESG) investing continues to break records, attracting nearly $2 trillion in assets as of Q1 2021.

Sources: Morningstar 04/30/21, Reuters 01/28/21

The Opportunity

Within the sustainable investment landscape, three particular segments may be poised for potential growth: green bonds, solar PV, and transition finance.

Green Bonds: In the last year, green bond issuance has quadrupled to $131 billion globally.

Source: Refinitiv 04/23/21

Solar photovoltaic (PV) installations: Global solar PV installations are set to rise roughly 28% over two years.

Source: Bloomberg NEF 03/01/21

Transitional finance: These are financing tools designed for big carbon polluters to adopt greener alternatives. In the future, these types of vehicles could accelerate. For instance, bonds whose interest rates would likely increase if sustainability targets aren’t met.

4. Future of Work

Since COVID-19, job markets have faced a historic change. One study shows that 22% of the U.S. workforce are projected to be working remotely by 2025, equal to roughly 36 million Americans.

Sources: Center for the Digital Future 08/26/20, Upwork 12/15/20

The Opportunity

As traditional work models shift, key industries could be impacted, for instance:

Video conferencing: Global market size is projected to jump from $9.2 billion in 2021 to $22.5 billion in 2025.

Office space: Future office space preferences are changing. According to one study, here is how CEOs view their office space needs going forward.

• 76% less office space is needed
• 18% no change
• 6% more office space needed

Interestingly, it is estimated that one-third of power, utilities, and renewables companies are looking to add more office space going forward.

5. Healthcare

Health costs related to the pandemic are set to reach a staggering $2.6 trillion.

At the same time, digital healthcare investment hit record levels last year:

• • 2020: $21.6 billion
  • 2019: $13.9 billion

The Opportunity

Especially as behavior shifts to digital platforms, the demand for healthcare innovation is likely to expand. Here are three segments of health expenditures, and their potential to be virtualized:

• • • Urgent care visits: 34%
    • Office visits: 24%
    • Home health visits: 20%

One estimate suggests that 20% of all healthcare spending in the U.S. could be conducted virtually, worth $250 billion.

COVID-19 Recovery: The Next Stage

New and powerful trends—from AI to ESG investing—have the potential to structurally change systems and industries.

At the same time, many of these trends aim to solve complex problems. How investors adapt could have lasting effects on their portfolios. Thanks to these underlying shifts, new opportunities for investors are underway amid a COVID-19 recovery.

This infographic is available as a poster.

How Retirement Planning Today, Can Ensure Freedom and Stability Tomorrow

When it comes to retirement planning, millions of Americans across different generations are finding it difficult to feel secure.

This is evidenced by the fact that only 54% of Baby Boomers have a retirement strategy in place. For younger generations such as Millennials, this falls to as low as 31%.

Thankfully, it’s never too late to start thinking about retirement. In this infographic from New York Life Investments, we’ve put together a straightforward overview that covers the various aspects of the retirement planning process.

How Much Should You Save?

Although this is one of the most frequently asked questions, it doesn’t come with an easy answer. That’s because retirement planning isn’t just about dollars saved, it’s also about income.

The following table lists a number of factors that could affect the level of retirement income you might need:

*Source: U.S. Department of Health

After estimating your retirement income, the next step is figuring out how to achieve it. Here’s how a savings plan might look, based on two assumptions: (i) your retirement income is equal to 70% of your current annual income, and (ii) you are able to generate an annual return of 7%.

The key takeaway from this table is that the earlier you start saving for retirement, the lower your monthly burden will be.

It’s also important to remember that the 70% retirement income goal was simply used as a benchmark—your own retirement strategy will ultimately be guided by your unique needs.

The Importance of Financial Assets

In the previous example, our second assumption was that you were able to earn an annual return of 7%. Achieving this typically requires the use of financial assets like stocks and bonds, which have the potential to grow your wealth much faster than a typical savings account.

For example, as at March 15, 2021, the national average interest rate offered by a savings account was 0.04%. Compare this to the S&P 500, which has generated an average annualized return of 13.9% between 2011 and 2020. The S&P 500 is a stock market index that consists of the 500 largest publicly-traded U.S. corporations.

Issues become apparent when we take a closer look at who actually owns stocks.

Source: Federal Reserve

With only 31% of families in the bottom 50% having exposure to stocks, many Americans are missing out on a powerful tool for growing their wealth. This highlights the importance of investor education, particularly when thinking about retirement.

Retirement Planning Accounts

Retirement accounts are another important tool that many Americans are not using to their advantage. For example, just 50.5% of Americans own a retirement account, while 98.2% own transaction accounts (checking or savings).

Here’s a simple overview of two retirement accounts that most Americans have access to.

Traditional IRA

A traditional IRA (Individual Retirement Account) provides tax benefits to help you prepare for retirement. It can be opened online or in-person through various banks, brokerage firms, wealth managers, or trading platforms.

Contributions to this account may reduce your taxable income for that given year, but these assets will be locked until retirement. Once retired, any untaxed income would be taxed upon withdrawal, ideally when you are in a lower marginal tax bracket.

Traditional 401(k)

A traditional 401(k) is typically offered through your employer and offers similar tax benefits as an IRA. Contributions into a traditional 401(k) reduce your taxable income, but in this case, they are automatically taken from your payroll.

An added benefit of the 401(k) is that your employer will usually match some or all of the contributions you make.

Roth IRA and Roth 401(k)

The Roth variants of these accounts follow a similar concept as their “traditional” counterparts, but flipped around. This means that contributions are taxed, while withdrawals are tax-free.

Ultimately, the decision to use either a Roth or traditional account will depend on your financial position, and can be a great topic to discuss with a professional advisor.

Feeling Secure

While everyone has different goals for retirement, the need for financial security is shared by all.

It’s been estimated, however, that the average American has a retirement savings shortfall of nearly 10 years. Also known as longevity risk, this dilemma refers to the scenario where retirement savings and income are unable to support you for the rest of your life.

With this in mind, it’s never too late to take control of your future and put a plan into place.