COVID-19 has sent shockwaves across every sector in our economy,
and each of your clients is being affected
July 15, 2020 By Tavis C McCourt
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.
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