Are your investments and superannuation ready for the new normal.
While no sector of the economy has gone untouched, over time many sectors may normalise, with some returning to business as usual and others returning to a “new normal”.
2020 was a year of rapid change and rapid response. Changes in working and living that COVID-19 has triggered carry wide implications. We need to look at various investment themes including working from home, infrastructure planning, and e-commerce and digital acceleration.
The push to work from home and the pull to return to work
Flexibility has long been a desired option by employees, but the success of working from home (WFH) during the COVID-19 outbreak has resulted in many employers embracing the option of letting a portion of their workforce work from home. This has been possible due to the transformational changes in technology over the past 10 years, such as faster Wi-Fi, 4G and 5G, more reliable video and audio conferencing platforms, and the proliferation of cloud-based services. The level of WFH rates will influence not only valuations in key asset classes but also company cost structures, urbanisation focus, as well as commuting and transport planning.
Infrastructure and fiscal planning
The COVID-19 crisis has seen the Australian Federal Government direct some of the more active fiscal policy at assisting this transition to preferences around working and living. In particular, there has been a continued focus on infrastructure spending at both the federal and state level – with significant levels of new spending committed in 2020. At the federal level alone, this is expected to exceed $60 billion over the next few years, with further contributions from state and local governments.
The bulk of infrastructure spending has been focused on transport – including both roads and rail. This should assist the transition of work and life habits post COVID-19 –with improved transport links a key factor in determining where and how households decide to work.
Digital disruption and acceleration
More people working from home likely means more shopping from home as well. With consumers not wanting to leave their homes, the move towards the digitisation of consumption is gaining even more speed. This means further share gains and new opportunities for the internet giants in small business connectivity and in helping retailers build out their digital offerings.
Food delivery growth has been pulled forward with aggregators seeing the major gains. Growing ride sharing firms and industrial real estate investment trusts are all among the beneficiaries. Traditional retailers with large physical infrastructure, companies that lack the ability to scale a digital offering and the landlords of a rationalising retail footprint are all among the more challenged cohorts from this trend.
Will we return to a “new normal”?
Australia has managed second wave virus risks effectively, established longer duration crisis support, and recalibrated the fiscal pulse to pursue outsized traditional growth stimulus. All stops are out on driving a recovery and although ultimate success continues to be vaccine dependent, the early reads on changed behaviours can provide investors some degree of confidence in recovery paths.
However there’s no doubt the impacts of COVID-19 on macro trends and individual consumer behaviours will affect investing fundamentals for years to come. While no sector of the economy has gone untouched, over time we expect many will normalise, with some returning to business as usual and others returning to a “new normal”.