COVID-19 or Corona virus ECONOMIC IMPACT background concept. Mockup mobile phone for Covid 19 business impact with facial masks and Alcohol Mini Hand Sanitizer gel on working office desk table workspace.
COVID-19 is first and foremost a healthcare crisis, and its impact on the world has been devastating. That said, as investors, we must try to determine the long-term economic consequences of the pandemic. Below are some economic developments we think the virus is bringing about or is accelerating:
- The transition from bricks and mortar to online retail. E-commerce as a percentage of all sales jumped five percentage points this year to 16.1%. The competitive pressure on traditional retailers, and owners of retail real estate, should continue. Ironically, much of traditional retail real estate could survive if it is retrofitted for storing and shipping goods purchased online.
- Rethinking how and where we work. Eventually, we will go back into the office, but companies are likely to keep a meaningful percentage of employees working remotely post-pandemic. Cities will likely see lower tax revenues as workers no longer commute in, while landlords will need to repurpose an untold amount of excess corporate office space.
- The decline of the four-year university. Undergraduate enrollment has been falling for years; demographics, cost, and the rise of remote learning, along with other forces, will make it very difficult for traditional universities to attract enough students to cover their expenses. The way education is “delivered” will need to be reimagined while hundreds of universities will likely close.
- Inflation or deflation. Our policy response to the pandemic has been unprecedented, with the Federal Reserve cutting interest rates to zero and launching a massive securities purchase program, and the federal government running historically large fiscal deficits. Those actions will likely either feed inflation as the economy reopens or feed deflation as accumulated debt weighs on economic growth. While it is too early to know, the impact on interest rates, and with it the expected rate of return across asset classes, should be dramatic.
The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Brinker Capital Investments, LLC, a registered investment advisor.
Tagged: weekly wire, market perspectives, Tim Holland, COVID-19, economic impact
Tim Holland, CFA
Tim Holland is the Chief Investment Officer at Orion Advisor Solutions, where he oversees the investment management and strategies for Orion Portfolio Solutions and Brinker Capital Investments. Prior to his current role, Tim was the Global Investment Strategist at Brinker Capital where he worked with senior members of the investment team to develop and deliver Brinker Capital’s macroeconomic and capital markets outlook, including the company’s investment views and portfolio positioning. Tim has over 20 years of investment experience.
Prior to joining Brinker Capital, Tim was a Portfolio Manager at TAMRO Capital Partners, where he directed overall portfolio construction on two long-only, US equity strategies based on fundamental company and industry analysis and understanding the potential impact of economic, industry, and political trends on portfolio holdings. Prior to TAMRO, Tim was employed as an Equity Analyst at Manley Asset Management, a long/short hedge fund firm. Additionally, he was a Partner at Towers Group, a boutique corporate communications firm providing media and public relations counsel to capital markets companies. Tim received his Bachelor of Arts in political science from Drew University. He holds a FINRA Series 65 designation and is a CFA® charterholder.
Tim’s investment commentary can be found in various business media, including CNBC, Fox Business, Bloomberg TV, Bloomberg Radio, The Wall Street Journal, Investor’s Business Daily, and Financial Times.