Winners and losers in a post-coronavirus world
The world after the coronavirus will be quite different, with structural changes taking place as people adapt their behaviours. We look at some possible winners and losers.
Change is an odd thing. It is very hard to see in real time, but in hindsight it becomes all too obvious. In this sense it resembles trading – we can always see what we should have done when we look back at a chart, but forget that life is lived forwards, not backwards.
So it is with real life. Over the past 20 years, the rise of the internet and its increasing capabilities have brought into question many of the assumptions that governed our daily lives, eg how we work, shop, travel and learn. The coronavirus pandemic has brought many of these into sharp relief, in the process changing assumptions about what the world will look like once this crisis has passed.
The world of work is changing
For example, as countries around the globe mull over the reawakening of their economies from lockdowns, the question of how and when to return to work has been raised. For over 20 years the concept of working from home has become more popular, although it has met with scepticism in some quarters and in some age groups. But the COVID-19 crisis has forced upon businesses the need to adapt to remote working for all employees wherever possible.
In the future, many more workers will stay at home for at least part of the week, reducing pressure on transport networks. But it will also affect office demand - will companies be so keen to invest in large office spaces they know will only be used by part of the workforce at any one time? Will workers be keen to go back to open-plan offices and shared desks when there is a risk of infections? Construction firms may see reduced demand for new buildings as a result, although firms that provide office refurbishment could come out ahead as workplaces are changed to fit a more infection-conscious world. In addition, with demand for office space lower, real estate investment trusts (REITs) may find their rental income falls, putting pressure on dividend yields.
People will shop differently
In the field of retail, the shift to online buying has been in evidence for a long time. Firms like Amazon in the US and ASOS in the UK are prime examples of the rise in internet shopping. But as consumers realise just how much of the world is available to them via the internet, the need for big shopping centres will come into question.
Again, this is an existing trend; across America, the great shopping malls of the 20th century are in retreat, with many almost empty and plenty having closed down, now standing as memorials to a vanished world. In the post-coronavirus world, more and more retailers will continue to cut back on their physical stores, saving money on rents and infrastructure, while bolstering their online offering. REITs will be under pressure here too, having already found themselves lumbered with huge shopping centres where footfall is in seemingly-irreversible decline.
What about consumption more generally? Will we be happy to go back to a world of rampant consumerism, or have the lockdowns taught us that there are more important things in life? With so many shops closed as non-essential to society when lockdowns are in place, will retail sales go back to where they were? True, humans will continue to want ‘stuff’ in all its forms, but the focus may be more on spending time with families, and this will change the face of economies such as the US and UK, where consumer spending has long been a big part of economic growth.
We will do more from home
People may travel less too, which will be good for the environment, but will also make life much more difficult for airlines. Warren Buffett, perhaps the greatest investor in history, has stolen headlines with his decision to abandon all his holdings in US airlines, arguing that the future is very bleak for these big businesses. Concerned about the environmental impact, workers and consumers may look to find greener ways of travelling, working and holidaying, which means fewer air trips. Both budget airlines and the big flag carriers will see their business cut back as a result.
Another area that will change will be learning and online collaboration. Companies like Citrix and Zoom have prospered as workforces beef up their software to work remotely, while students have increasingly taken courses online. The need to be physically present will not go away, but the realisation that much can be done online will only intensify the shift to working and learning from home. Digital course providers will benefit, as will those firms providing software for schools and colleges.
A new world awaits
It is still very early days, but it is likely that the post-coronavirus world will have undergone fundamental revolutions in so many activities. Things that seemed perfectly normal in January 2020 will be obsolete, while existing trends have been accelerated. Change was already happening, but will have been brought forward by this unexpected social and economic tragedy.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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