The bank’s CIO office highlighted the «long runway of growth» for the health care sector, said the rise of the Metaverse as our «parallel universe» has come to the fore as Big Tech has rapidly jumped onto the bandwagon.
DBS is advocating for portfolios to stay invested amid divergent markets and the Fed’s policy tightening, in its CIO Insights for Q1 2022, titled «A Divergent World,» published this week.
According to the bank, previous drivers for its constructive view have not changed: the shift of the world to a digital economy, which will provide a tailwind for technology companies, and that the Financials sector will be a beneficiary of interest rates normalising.
Negative real yields from the surge in inflation will also continue to favour equities over bonds, DBS said.
Health Care Tailwinds
The report highlighted the health care sector’s strong long-term fundamentals, solid earnings and share price performance, particularly big pharma.
And while the pandemic has put the health care sector under the spotlight, DBS said that there are several structural tailwinds underpinning health care’s sectoral dynamics beyond the pandemic, namely: 1) Ageing population and longer life expectancy, 2) Rising disposable income and medical expenditure, and 3) Continuous R&D to drive medical and technological advances.
«Unlike cyclical industries, health care demonstrates a consistent trajectory of revenue and earnings uptrend over economic cycles,» DBS said.
DBS called the rise of the metaverse a «transformational shift» and said Big Tech, game engines, and semiconductor companies are geared beneficiaries when the mass migration to the metaverse takes place.
The Virtual Reality (VR)/Augmented Reality (AR) market represents only a tip of the iceberg, DBS said. With commerce, social and work set to be revolutionised, there are «significant implications» on companies in the years to come, DBS noted, highlighting digital advertising, the rise of «phygital» retail, which blends physical and digital experiences, as well as remote work moving beyond Zoom calls.
As such, game engines and developers – the «architects of the metaverse,» Big Tech (FAANG companies), as well as infrastructure providers and hardware manufacturers are expected to outperform with the evolution of ther metaverse.