Emerging macroeconomic trends in the post-COVID-19 world: An investor’s perspective

By Svetlana Borovkova, Kevin Rojer & Monika Furdyna / August 2020

COVID-19 epidemics will cost the global economy many trillions of dollars, and exact eco- nomic loss is hard to predict and comprehend. Dubbed the most critical global health crisis since the Spanish-flu, the economic toll of COVID-19 is unlike anything that we have expe- rienced before. Containment measures induced an unprecedented synchronized pause in the global economy and severely affected businesses and entire industries. Social distancing, travel restrictions, and lockdowns disrupted supply chains and diminished demand.

The coronavirus threat will continue to trigger massive societal changes with wide-ranging im- pacts on economics. Currently, IMF forecasts the effect on global GDP for 2020 is at least –6%, with substantial downside risks if containment policies are prolonged. Long-term, the COVID- 19 crisis will reshape society in lasting ways. The pandemic is reorienting our relationship with the government, businesses, the outside world and even each other.

The stock market also suffered significant shifts in valuation as investors feared that the coron- avirus spread would destroy economic growth and that government action would not be enough to prevent the damage. This sentiment towards financial conditions amplified the turbulence caused by mass panic. The expected economic changes caused by the pandemic are calling investors to re-evaluate their portfolios.

Despite the enormous negative impact on the economy, the COVID-19 crisis has the poten- tial to open new possibilities for economic and environmental transformation as well as to give a boost to some sectors, such as healthcare and IT. While some of these transformations are obvious, others are less so.

In this paper, we discuss the three main emerging societal trends that we have identified: so- cial transformation, digitalization and socially responsible innovation – and the effect of these trends on companies and sectors. In our high-level qualitative analysis we take into account issues such as consumer behavior, business opportunities and government support.

Given the emergence of these trends, an investor can use our qualitative framework to rate com- panies in terms of resistance to these trends. In this way, the emerging trends can be thought of as new “investment factors”. Portfolios then can be tilted towards the companies that are ex- pected to perform well in the light of the emerging trends and away from companies that could be negatively affected by the upcoming economic changes.