It is ironic that, while societies around the globe are warming up for a pre-Christmas lockdown and another potential slump in economic activity, the pandemic itself continues to act as a catalyst for an acceleration in a number of megatrends that were already under way well before the virus hit.
Changes that would normally occur over the course of years are happening in much shorter time frames, calling to mind the famous quote by Russian leader and revolutionary Vladimir Lenin: “There are decades where nothing happens; and there are weeks where decades happen.”
History has shown that a crisis, like war, a depression, or in this case a pandemic, accelerates trends and spurs innovation on a large scale. Despite all the human tragedy and hardship that society is experiencing at the moment, there are several secular trends that are seen entering an exponential growth phase due to strong tailwinds from the pandemic.
Above all, this means the rapid introduction of technology, and especially artificial intelligence (AI), that shatters a generation of business practices and has already begun to refashion everything from manufacturing to healthcare to education. It means a rising concern for climate change that will boost demand for more clean alternatives and curtail less essential travel. It means new patterns of living, working and shopping that transform returns on real estate.
The economy’s sudden halt and social distancing measures had an impact on the way people and businesses operate and consume globally. Companies are reacting and adapting quickly to the new environment in order to continue serving their customers while preserving their employees’ health and safety. The pandemic is clearly contributing to the reinforcement of existing tailwinds in online trade, contactless/mobile payments, remote working and education solutions, as well as cloud services.
In the US for example, shoppers are finally embracing contactless payments after traditionally resisting new payment technologies that have spread more rapidly across Europe and Asia. This, is turn, is prompting shops to speed up the rollout of contactless terminals and the introduction of services like Apple Pay and Google Pay.
With more people staying indoors particularly during weekends, it is inevitable that we also witness a surge in video-streaming. In effect, traffic to Netflix, YouTube, Amazon Prime and gaming services have seen a huge surge. Shares of Netflix are up more than 55 per cent for the year, close to an all-time high. Meanwhile, terrestrial cable is suffering, with declining audiences year-over-year impacting a bellwether company like Disney.
In effect, everywhere you look, the pace of technology use is accelerating. Facebook fatigue seems to have evaporated and social networking is up. The use of Microsoft Teams video chat service set a new daily record of 2.7 billion meeting minutes in April, and Zoom has grown from 10 million users to more than 200 million, despite concerns about its security offers. Meanwhile, its share price also skyrocketed by over 600 per cent so far this year.
Elsewhere, the share of e-commerce and grocery deliveries to the home is increasing rapidly, for the obvious reasons, further fortifying the competitive positions of Amazon and Walmart Inc., already the largest retailers in the world.
The renewed interest in having a comfortable time at home will be here to stay for a while. Combined with more permanent working from home, a next step might be an exodus away from big city centres to the suburbs and nearby countryside with affordable residential zones.
Meanwhile, store closures have obviously pushed consumers to shop online, but the trend was already gaining traction. Reluctant consumers might subsequently realise that, at least for bulky or heavy items, online shopping is more convenient, leading to permanent changes in consumption patterns across generations.
It now seems very likely that the current situation will have a long-lasting, positive effect on the investment themes mentioned above, enabling them to accelerate through the adoption curve. Similar to most major crises, the unprecedented situation the world is facing calls for accelerated innovation. Companies are rethinking their business models and day-to-day operations while social distancing poses challenges for the vast majority of collective, in-person activities.
Everywhere you look, the pace of technology use is accelerating
Robotics is of particular interest in this context, especially if social distancing persists and makes it impossible to perform jobs in those sectors that require close personal interaction, such as food services, the hotel business, social assistance and cleaning. Manufacturers of robots have been quick to react. Fully-automated disinfection robots which use ultraviolet light are already roaming hospitals, nursing homes and other public spaces around the globe.
The pandemic is contributing to accelerating the process of robot acceptance. AI and robotics will penetrate additional professional spheres, potentially significantly reducing the social skills advantage that humans have over AI. Every recession leads to structural changes in labour markets and automation as a whole could emerge as one of the beneficiaries of our new lifestyles.
Healthcare innovation, the ageing population and its associated healthcare cost burden are some other key components to watch out for. The current pandemic, stricter hygiene rules and consequent behavioural shifts have raised health awareness among populations and governments. The ‘new normal’ is likely to act as a catalyst, leading to increased investment and the early adoption of innovative solutions in the healthcare space.
In the field of medicine, apprehensive patients have embraced the once-dubious notion of online consultations. These existed before the outbreak but demand for them is now surging, accelerating the change towards more cost-effective solutions and leaving the door open for more automated procedures.
Ultimately, we must not forget that this remains essential a health crisis and the importance of innovation within the healthcare sector has been heightened by this crisis. Research and development within the sector is driving advances in both treatment for patients and the technology and equipment used by healthcare professionals, leading to increasing safety and productivity. Healthcare companies that are improving treatments and outcomes for patients and providing more economic medical solutions should be positioned for success once we emerge from this crisis.
Although not directly related to the outbreak, themes such as resource efficiency, environmental protection, evolving mobility, solar and wind power are likely to be supported by future fiscal stimulus packages around the world.
Historically, infrastructure spending has formed part of stimulus packages and governments will attempt to kill two birds with one stone this time around, simultaneously stimulating the economy and improving sustainability.
The COVID-19 pandemic will accelerate trends that were already in motion and cause some other secular shifts we may not have expected. These behaviour changes will likely remain entrenched after the pandemic now that individuals have become more comfortable using the services and accustomed to the conveniences they provide.
For more information visit, www.cc.com.mt. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.
Stephen Borg, head of wealth and fund management at Calamatta Cuschieri