Investment themes persisting post the pandemic

Of all Winston Churchill’s famous quotations, one which perhaps gets less airtime, but which is particularly apt today, was his suggestion to “never let a good crisis go to waste”.

Its beauty, according to William Lough, manager of ES R&M UK Dynamic Equity, is the simplicity with which it turns the situation on its head. “Rather than dwelling on one’s current predicament, it forces listeners or readers to think about how they can turn the situation to their advantage,” he said.

And that is exactly what we have been seeing in recent months: with much of the global population living under some form of coronavirus-induced lock-down, we have all experienced a sudden shift in habits, with many areas of daily life quickly shifting from offline to online. From food delivery to online learning, dating and pub quizzes to drinking or watching movies together, there is a new level of dependency on the internet and our mobile devices. But which will endure beyond the crisis?

Working from home

Some 30% of the global population is still working from home, and many believe that this trend in particular is here to stay. But does it spell the end for big cities? Schroder’s Mark Callender says probably not. “Cities have faced these problems before,” he said, “and simply reinvented themselves. Take London in the 1960s and 70s, for example. The population fell by around 25% as manufacturing moved away. But other businesses moved in and by the 1980s it was thriving once again.”

There are pros to working from home: more time with the family, money saved on the commute and less carbon emissions. But there are also cons too: more time with the family (!), fewer opportunities to network, improvised workstations (leading to back problems) and possibly slower career progression. And it has been tried before – and not been overly successful. IBM – which was an early adaptor – brought people back to the office in 2017 to improve morale and engagement. 

It’s also not obvious that there are many benefits for employers – Schroders, for example, spends less than 5% of its outgoings on rent. Training can also be less effective, there is less sharing of ‘culture’ and innovation could be stifled. Then there’s how to effectively protect sensitive information.

“Offices won’t disappear,” Mark continued, “but in the future it may be more about how office space is used: for example, the things we can’t do at home. So spaces that encourage collaboration and teamwork.”

Spending time at home

Home entertainment in the form of paid-TV subscriptions and video gaming have been real winners over the past 6 months or so and data from the Nissei Research “Change in Lifestyle” survey confirms that people in Japan have been spending more time with their families and at home even after the National State of Emergency was lifted at the end of May, hinting that these trends may have some persistence.

Rathbone Global Opportunities manager James Thomson says online dating has also been a surprise winner. “Yes, people are still finding love in lockdown,” he said. “There has been a 30% increase in women signing up to services such as” Goldman Sachs managers agree: “With social distancing and outright lockdowns being implemented all over the world, one might think that dating would be put on hold. But true to form, millennials especially decided to do the unconventional and have already made digital dating their new norm.

“Home, alone and in some cases without a job, single people are spending more time swiping right on dating apps to find love, particularly in the cities hardest hit by the virus. Most notably, the biggest increase in usage and activity on Tinder came from female users under the age of 30, with daily average swipes increasing by 37% for this demographic. This pandemic induced shift in the gender dynamic has been a very healthy development for the online dating ecosystem which has long attracted men in droves, trying to court women that have been wary to sign up.

“It has been widely accepted that office technologies like Slack and Zoom which are being employed as people work from home, may very well be in use after the global pandemic subsides. Similarly, dating habits formed during quarantine, are likely to be a part of the millennial repertoire for the foreseeable future.”

Holidaying at home

Google Mobility data shows meaningful, if plateauing, recovery in general activity but the continued heavy restrictions on foreign travel are restraining the tourist trade. While visitor numbers may eventually recover, those businesses reliant upon tourists will continue to have a tough time and this provides important context for investors.

It could be that staycations are here to stay – at least for the time being. Airports, airlines, trains and resorts are all feeling the strain. Eurostar, for example, anticipates that its trains will not stop in Kent until 2022 due to decreased demand. And First Sentier Global Listed Infrastructure manager Peter Meany commented: “We expect airports will have a longer recovery period than other areas. Domestic flying will return first, then regional – such as within Europe or Australia and New Zealand.

“However, the high value customers are international. Compared to domestic, they pay up to three times more to land and spend five times more once they arrive. As a result, we are forecasting at least a three-year recovery period for this type of asset.”

So instead, proprietors of cool camping holiday experiences, seaside holiday lets and the likes of Whitbread – the owner of Premier Inn, and a holding in Baillie Gifford Strategic Bond, are likely to be the winners.

‘Keeping’ the home

Less headline-grabbing, but potentially more impactful could be a pandemic-inspired revolution in politics within the home. While UK headlines are all about women taking on more of the unpaid work during lockdown, a recent survey by the Japanese Ministry of Internal Affairs reported that in more than a third of married households the husband’s role in child raising and household chores had increased over recent months.

Furthermore, whilst “life satisfaction” declined across all groups it was most resilient for both women and men in households where men had stepped up the most. Dan Carter, manager of Jupiter Japan Income fund commented, “Whilst we must be careful not to read excessive meaning into this fragment of survey data it does at least hint at a more 21st century division of domestic labour and the potential effects upon female working and spending patterns as well as future birth rate that this might imply.”

Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed are those of the author and managers quoted not constitute financial advice.

Published on 05/10/2020