Preparing & Positioning your Portfolio for the Post Pandemic Era
The Future, The Fantasy, The Forthcoming — Benefit from it
“History repeats itself, but in such cunning disguise that we never detect the resemblance until the damage is done.”
Relevant, germane & pertinent words from Sydney J. Harris, the famous American journalist, teacher, lecturer, who received numerous honorary doctorates during his career and could figure out people’s inability to learn from the past.
Very often History keeps coming back reflecting similar patterns, similar behavior of mortals, similar preferences which emerge after every catastrophe, after every Pandemic, after every calamity.
Hyper risk-taking attitude, hyper-consumerism, hyper greed coupled with instant gratification leading to hyper-growth of underlying economy post the event.
Does this sound familiar?
1918 -1919, The Spanish flu which as per CDC’s (United States Centers for Disease Control and Prevention) estimates infected 500 million people and led to 20 million casualties was succeeded by 13 %+ Real GDP growth in the United States in 1923. Germany was defeated convincingly in the Second World War which ended in 1945, a decade later the IIP (Index for Industrial Production) for Germany was 4X as compared a decade earlier. In 2000 immediately after the dot com bubble burst, the US real GDP grew by 4.1% the highest in the 21st century. The Global financial crisis of 2008 was no exception, which witnessed the steep downfall in US GDP (DE growth of 0.1% in 2008 and -2.5% in 2009) followed by 2.6% Real GDP growth for the US.
The Present, the now, the today of 2021 -2022 (a few quarters away) which soon be called as Post Pandemic era will witness similar, sharp, and succinct recovery backed by cheap liquidity, benign interest rates, need for instant gratification, want to get out and relive and satiate, insatiable desires.
In the US, where nearly 50% or more inhabitants have already been vaccinated are moving away from the central business districts, buying spacious, comfortable abodes from where they can digitally work yet have fun. More millionaires are retiring to explore the world and fulfill their unfulfilled wishes as to the fear of END which had haunted everyone for the last 16 months and has been encountered by many from close quarters. Mental blocks of transacting online, closing deals, selling & pitching online, and working from home online have been shattered.
Are these changes permanent or temporary?
Do these changes in one’s behavioral pattern also redesign the definition of what is essential, what is necessary, and what is a luxury?
1. Technology is the new Utility
The generation post the last Pandemic of 1918 or even till mid of last century believed cooking, interpersonal skills, grooming, sewing, gardening were essential for survival and success. In the last century or just twenty years back, water, electricity, etc were considered as Utility. This Pandemic has brought a paradigm shift in what is considered a utility. The first one starts with WiFi or Internet connection and then comes other utilities. Digital skills have become more essential than cooking or interpersonal skill or grooming as one is able to find food at a reasonable cost on the internet and one can earn and enjoy with limited interaction with society. Social distancing which became the norm during the Pandemic was adopted by Millennials a decade ago.
The sectors which will directly benefit from this new necessity include Telecom, which till recently had challenges on pricing power and thus compromised ARPUs despite increased reach. Pandemic is and will remain a game-changer for Telecom, AI-driven companies, IT, ITES, Telecom, and IT hardware businesses whose obituary was written years ago due to Chinese manufacturing capacities. Tables have turned and Hardware and software, trained educated people in both these areas are and will be in high demand.
2. Hyper Discretionary demand propelled by lower Interest rates
As humanity will come out of Pandemic, the need and greed to satiate one’s senses will be higher than ever. With interest rates being plunged to the lowest figure ever in the history of mankind with nearly one-third of the global bond market sized at 119 trillion USD, (~140% of total global GDP) trading at Sub Zero Yields, central banks across the world in no mood to derail the applecart will continue to have benign interest rates. People who have no means will borrow and spend whilst people who have means will spend directly and indiscriminately. Thus Banking, Lending, NBFCs, even Insurance (emanating out of fear), Asset Managers (rise of cheap liquidity leading to rise of equities, higher disposable income with lesser avenues of spending during Pandemic), discretionary demand like jewelry, white goods will witness promising quarters ahead.
3. Rise of Risk-taking ability, thus rise of Equities
With TINA (there is no alternative) factor across asset classes, coupled with massive equity rally worldwide having complete disregard for the underlying economy, with online platforms making it easier for retail to participate in the Wealth creation journey is and will continue to change the preferences of how one saves and one invests. With time in hand, and people spending time on finding ideals in the stock market have realized that volatility has only be curtailed by patience and emotional intelligence. This revelation is leading to systemic change where one is willing to take higher risk, higher volatility, and higher unpredictability of equities and this trend will only accentuate in years to come.
With structural reforms done in the past, with cheap capital, with favorable, young educated demographics; this third decade of the century will witness the rise of the Third World Country — India bringing on the Mother of all Bull runs.
Is your Portfolio geared for it?
