FORTUNE DECEMBER 2020 /JANUARY 2021 47difficult winter looms, the odds are good that these lifesavers
will help the global economy turn the corner on the pandemic in
2021—and, with luck, trigger a recovery that’s strong enough, and
broad enough, to KO both those K-shapes.
Where stocks are concerned, that ray of hope is leading pros to
reconsider where they’ll earn the best returns. In the industries
most beaten down by the pandemic, the thinking goes, companies’
shares should have more room to snap upward as their earnings
recover. “It’s the materials stocks, the consumer discretionary, the
financials, industrials that will come roaring out” as the economy
normalizes, says Sarah Ketterer, CEO of Causeway Capital. Many
managers believe that non-U.S. stocks, which sank faster than U.S.
equities as the pandemic settled in, are also poised to surge. What-
ever happens, FAAMG won’t be the only game in town, says Saira
Malik, head of global equities at Nuveen: “I don’t think we’re going
to end 2021 saying, ‘Five growth stocks were all you had to own.’ ”
Betting on these sectors doesn’t mean bailing out of tech
stocks. Technology’s central role in driving economic growth is
undeniable. (To see which companies are most likely to parlay
tech expertise into strong returns, read our Future 50 list in this
issue.) That said, analysts expect tech earnings to rise at a slower
rate than earnings for the S&P 500 as a whole in 2021. That’s
another sign that stocks in other industries could enjoy a pro-
longed spell in the sunshine as the global economy gets healthier.
With that in mind, we sought out stocks in six categories that are
poised to deliver big results as the world rebuilds.A
MONG THE MANY crises
that have kept Americans
awake at night in 2020,
one that looms large is
the idea of a “K-shaped
recovery” from COVID-19.
That’s the premise, backed by a growing
body of evidence, that a year of lockdowns,
isolation, and uncertainty have widened the
wealth gap between America’s work-from-
home managerial classes and its paycheck-
to-paycheck frontline workers—with the
two groups’ well-being moving in opposite
directions like the arms of a “K.”
The stock market, meanwhile, has under-
gone its own K-shaped recovery, albeit one with
less dire consequences. Borne up by events that
made us more dependent than ever on tech-
nology, from e-commerce to teleconferenc-
ing, the five Big Tech stocks lumped under
the awkward acronym FAAMG—Facebook,
Apple, Amazon, Microsoft, and Google—have
returned 52.5% year to date, compared with
just 6.3% for the other 495 members of the
S&P 500. Together, they now have a market
cap of $7.2 trillion. If you were keeping your
entire portfolio in a typical, “cap-weighted”
S&P 500 ETF, 23% of your assets would now
be parked in those five stocks alone.
The weeks before Thanksgiving brought
promising news on three COVID vaccines,
with more likely to come. Though a veryINVESTING IN THE BIG REBUILD
These companies and industries should rebound as the economy recovers,
giving investors a reason to rejoice.By ANNE SRADERS, JEN WIECZNER, SHAWN TULLY & MATT HEIMER
STOCKS
FOR 2021
ILLUSTRATION BY MATT W. MOORE