The UK healthcare sector is facing "the equivalent of a highly accelerated dotcom boom", where companies with "even a whiff of a product" that might help treat or prevent covid-19 set to be rewarded with a huge mark-up in their stock market valuation, according to Edinburgh boutique Amati Global Investors.
Speaking to investors in its UK Smaller Companies Fund and VCT in its most recent Investment Update webinar, Amati Global Investors CEO, Dr Paul Jourdan, pictured below left, said he expects that healthcare spending will as a whole rise significantly across the globe in the short to medium term.
"There will be big winners and there will be losers, and some of the investment we are seeing will be wasted. However, we badly need a result and the benefits derived will be wholly disproportionate to any over investment, not just in the UK, but on a global basis."
Turning to the pursuit of a vaccine, Jourdan said Amati deal with a significant number of medical companies and he feels "optimistic"
about the advances that will be made in helping us to manage the pandemic. "We believe medical science will not only rise to this challenge but do so in record time," he said
Jourdan also feels that inflation will be an emergent theme going forward, despite higher inflation being "a distant memory for most".
"People are starting to worry over the effects of the very substantial amount of money that has had to be committed out of necessity in socialising the problems of this pandemic," he said. "As fund managers we have lived through various crises, but we will have to dust off the textbooks on inflation!"
"As we come out of this crisis in some areas there will have been a hit to supply, and the recovery in demand is likely to be pretty strong; classically, in economic terms, that tends to be inflationary, and this may be one of the stories of 2021, if not the latter part of this year."
Jourdan cited the natural resources markets as being likely to exemplify this. He believes that anticipation of a higher rate of inflation is one of the factors behind the strength of the recent bounce in the market, with investors fearful not only of a resurgence of the virus and the threat of a second lockdown, but also being out of the market.
Fixed rate bonds are, he said, going to be "dangerous" if inflation creeps upwards, with real assets and good quality equities being the place investors will want to be.
Reasons for optimism
Jourdan, whose sector coverage includes healthcare, was quick to remind investors of the importance of remaining optimistic, even on the darkest of days. He believes the conditions for ending the lockdown, whilst complex, will be "within our grasp by June" and that we will by then have more tools in place.
"We will have better testing in place, we may have figured out contact tracing, we may also have figured out antibody testing," he added. We should also have some evidence to show which existing drugs and treatment protocols are the best for lowering the mortality rate.
"Secondly, I believe the Government bailouts both here and in other developed economies are likely to prove a good match for the economic damage of the lockdown period, provided they can be implemented as planned, and providing that further lockdowns can be avoided."