Read this Periscope to learn four themes for the near future. The past six months changed the world (again) and we’ll look back on 2020 as one of the most stressful of years. Hint: the key word of the near future is adapt.
Theme 1: Consumers go online FAST!
WalMart is, by far, the world’s largest retailer. Amazon is, by far, the world’s largest online retailer. The past six months has seen online sales FOR BOTH companies skyrocket. The next six months, and the near future will be one where the companies who can adapt will take market share from their competition, and whose share prices may increase. Who would have thought we could and would buy cars online? Talk with our doctors via telehealth—which amounts to a computer screen—did you?
This too, will change. Allegorically, the shopping malls near us are filling up. My college-bound daughter took advantage of the inventory on sale this last weekend and made a brilliant comment that I think you’ll likely agree with. “I’d forgotten how much easier it is to buy clothes in a store as opposed to online.” Think it through—the big box stores are not dead yet. The future belongs to the companies who can adapt.
Theme 2: Altered Workforce
Professionals stayed home and may not go back to the office. Real estate will change. Building owners need to find ways to appeal to the new work-from-home environment. Software, they say, is eating the world. Companies who adapt to the new work-from-home world, and who service this world, will continue to grow. The technologies of the future are cloud-based.
And, this too, will change. We are most productive in person. We cannot look a person in her eyes when we Zoom. Instead, we stare at our own video image and not the person we are talking to. Even if we look at the person who we’re speaking with, our eyes look askance because the camera doesn’t match their eyeballs. We are less productive in the ways that matter, and (perhaps) more productive in the diligent tasks that need to get done, when we work from home. I believe companies who adapt will provide investment opportunities and their stock prices may gain relative to their peers.
Theme 3: Massive government
Only a few months into the Covid-19 crisis, three times the money has been spent by governments around the world to stop the economic contagion than was spent over the entirety of the Financial Crisis a decade ago.
Did you catch that? It’s staggering. The governments are not yet done spending.
For business owners, the regulation changes are both an opportunity and a challenge. It’s hard to score a touchdown when the referee moves the goal posts. Similarly, if the referee is giving you an extra down, or three, to score then you play a different game. The economic implications of the government spending packages to consumers and businesses are well-intended and have unpredictable long-term results.
Plus, we have the single largest response in history provided by the Federal Reserve and other national banks. Over the short-term, the US stock market hit bottom and rebounded strongly on the very day the Federal Reserve announced there would be no end to the amount of money it would provide to the economy. That was March 23rd. So that was good news. But the longer-term implications are unpredictable. For the first time in history, the Fed is buying corporate bonds—which may keep alive some (or many) companies that otherwise would not survive.
Bottom line, companies that adapt to a new world of huge government will likely do better than those companies that play by last year’s rules.
Theme 4: Covid-19
By far the most important theme for the next few years is the way we adapt to Covid-19 and global threat. Over 180 companies are working on therapeutics and vaccines. The company and country who gets there first will be a clear winner.
On the other hand, that does not mean that company or country will be an investment theme that outperforms anyone else. Many of us take aspirin, but this doesn’t necessarily make Bayer a better buy than any one of the companies who advertises their expensive drugs on TV or anywhere else. Famously, some drugs are obscenely expensive—and profitable—solving sometimes rare ailments.
The investment themes for the new Covid-19 world affect every industry. The virus forced the hand of each of us to adapt.
Will Boomers ever feel safe after the virus set its sights on their generation and their parents? What companies will adapt and answer the need for senior housing? For healthcare? For travel?
The keyword for the new Covid-19 world is adapt.
The source of many of these ideas are nicely summed up by McKinsey and Company Covid-19 Evolving Implications for Business, updated often.
(1) McKinsey and Company Covid-19 Evolving Implications for Business