Research from approximately 60 Raymond James analysts has confirmed that no sector is unaffected by the short- and long-term impacts of COVID-19. This widespread crisis has altered business trends across every sector of our economy.
With no sector safe from the effects of this unprecedented crisis, each of your clients is being affected by these macro-level trends, whether they’re related to their work, lifestyle or how they invest. As a financial adviser, you are in a unique position to help guide clients based on potential effects to their financial plans.
Though long-term impacts are still uncertain, two distinct types of macro themes have emerged from the COVID crisis that are worth watching as you help clients navigate these uncharted waters.
REVERSAL OF CERTAIN LONG-TERM TRENDS
Numerous macro trends have reversed almost 180 degrees overnight, many of which likely won’t ever revert to their prior directions.
In the last 10-plus years, there has been a growing desire to densify office space and essentially any activity possible to help drive improved returns for business. With increased potential for working from home at many jobs, densification is simply not needed or desired for the foreseeable future.
Also in the last decade, and in many instances for much longer, urbanization globally and in the U.S. has increased almost unabated, driven by obvious economies of scale, centralization of talent, and consumer lifestyle choices. We expect the fear of being stuck in lockdown in a high-rise apartment or condo, combined with the experienced productivity of WFH, will drive de-urbanization in both the near and long term.
Many of us have joked about the panic around the sudden shortage of toilet paper. But just-in-time inventory for products including toilet paper had been the dominant supply chain theme since at least the early 1990s. Given the increased risk of disruption amid the crisis, and the fact that the cost of holding inventory is so inexpensive, we foresee the end of the just-in-time inventory trend.
We believe increased disruption risks will also lead to the decentralization of manufacturing. For decades, globalization has driven the outsourcing and centralization of manufacturing to achieve the lowest possible unit costs. However, this strategy has also caused single points of failure, and we would now expect the decentralization of supply chains globally in an effort to lower disruption risks.
Perhaps no industry is poised for a change in public sentiment as much as biotech/pharma ‒ and we expect an increased focus on public/private partnerships and the value to society of biotech/pharma development as a result of the ongoing crisis.
ACCELERATION OF ‘E-COMMERCE-IZATION‘
An online disruption of value chains has been accelerating in every industry. At the beginning of the crisis, we saw e-commerce and pickup/delivery in food retail rise, and we expect those percentages to be permanently higher as a result. We’ve also seen online disruption of health care, insurance and education pick up since the beginning of the pandemic.
The ability for white-collar workers to work from home (or from anywhere, essentially) has likely permanently increased, as companies appear to be realizing how productive employees can be when they work remotely, and that costs can be meaningfully lower in a work-from-home environment. We also expect to see some shifts in lifestyles, with some portion of workers who only live where they do because of job location choosing to live where they would prefer, thus driving population shifts.
Meaningful investments will need to be made — across tech, manufacturing capacity, transportation and more — to enable these trends over time. But with increasing uncertainty due to recent spikes in U.S. coronavirus cases, it’s important to stay informed on the macro-level trends that are occurring in our economy and how they may affect your clients and their long-term financial plans.
Tavis C. McCourt is institutional equity strategist at Raymond James & Associates.
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