Covid-19 variants, such as the Delta subvariant discovered in the U.K., are likely to continue to inject volatility into global equity markets.

Best Ideas
In the U.S., reflation and expectations for higher yields could bolster returns for small caps, as well as companies with pricing power and reopening tailwinds. Supportive monetary policy and the prospect of stronger relative earnings growth could boost select stocks in cyclically oriented sectors in developed non-U.S. markets, particularly in Europe and select emerging markets, ex-China. Select growth companies well positioned for reopening, such as front-office software leaders, also look attractive. Our long-term approach tilts toward cyclicals and value stocks exhibiting strong earnings growth and pricing power.

In Focus: A Second Life For Medical Tech
Medical technology continues to be one of the most sensitive industries to global Covid-19 case counts and hospitalizations, given the pandemic’s impact on the timing of elective medical procedures.

Outside of a few select areas (cardiology, neurovascular), most procedures can be deferred for months or even years. Such delays became the norm in 2020 as hospitals paused elective procedures. The result: Medical tech’s growth was stymied, causing broad revenue declines across the industry. Even as vaccine rollouts accelerated, the virus surged in the winter and summer of 2021, leading to more delays in elective procedures.

Despite the challenges, we are growing more bullish on these companies, especially with the peak in Delta variant cases likely behind us. Longer term, we believe evolving medical technologies will lead to fewer complications and shorter hospital stays, at times providing alternatives to drug treatments that may carry adverse side effects.

We expect the pandemic’s impact on health care systems to diminish as vaccinations continue to climb and better patient-management protocols help alleviate the backlog of procedures. Covid-19 has also served as a catalyst to shift elective procedures away from acute care hospitals and into lower cost outpatient facilities.

Lastly, Covid-19 headwinds have resulted in relatively attractive valuations for medtech companies compared to their historical premiums versus the S&P 500.

Saira Malik is head of global equities at Nuveen.

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