Investor Column | COVID-19 is a watershed moment for the digital economy
The S&P 500 Index performance in April posted percentage gains not seen in one month since 1974. To many, that felt like the start of a strong V-shaped market recovery that will not be heading back down.
To Federal Reserve Chairman Jerome Powell, the market gains in April were potentially an indicator of a bear market rally in a U-shaped recovery.
A recent Reuters poll of 45 economists show that slightly less than half of the participants see a U-shaped recovery, with 10 percent seeing a V-shaped recovery, and 5 percent seeing a W- shaped recovery.
A U-shaped market recovery is where the market drops for a period of 12 to 24 months and during that time there is potential for multiple bear market rallies until the market ultimately finds its footing and climbs out and begins a new bull market.
The loss of life caused by the coronavirus is tragic and it continues to be a battle by our communities and health care systems to protect more friends and family from being taken from us. Dade, Broward, and Palm Beach counties shelter in place order expired Thursday for not at-risk citizens and the new plan to carefully open the state on Monday was announced by Governor DeSantis on Wednesday. This new “Safe. Smart. Step-by-Step. Plan for Florida’s Recovery” will start allowing people to go about their daily lives for business and pleasure in a totally new and different way. Granted, it will be much better than the last 30 days!
The way life occurred digitally these last 30 days will have a lasting impact for the foreseeable future. Obviously without the certainty of a vaccine, we will continue to reduce our in-person activities. We have been told that we are looking at 12 to 18 months till we have a vaccine. So, considering the changes to our interactions, there are clear beneficiaries of this transition in the realm of communications, entertainment, and business.
Regarding consumer services, food delivery and drive thru food services have become essential for social distancing. Online school platforms such as Schoology and Florida Virtual School ramped way up to manage all K-12 students since spring break. Retail shopping has moved even more online with digital stores getting all the business from consumers at home these past weeks. Streaming services have also done exceptionally well this past month. The app Teladoc allows consumers to meet with their doctor via video chat. Even government offices have experienced increased volumes of business online with document renewals like car registrations, and other document processing.
In the business realm, it’s no surprise to see Microsoft, Amazon, Alphabet, and other cloud business entities doing quite well. The emergence of Zoom video calling has been impressive. Slack, MS Teams, Salesforce and other collaborative work platforms have been integral in the work at home reality. Also, VOIP phone systems such as Ring Central have also helped carry the heavy load for re-routing phone calls to employee homes.
Make no mistake, the world has changed with how we live our life and how we do business. Those changes have both positive and negative effects.
The digital economy has just been thrust into people’s lives even more than ever before. Many of the positive changes such as less business air travel and less driving to an office to do face-to-face business will become more common even after we beat the virus. These digital business changes will free up our society to allow us to have additional free time.
The downside is that we are meant to be with other people and this new detachment due to our growing digital economy creates problems with isolation. We will beat the coronavirus in time, but the effects of this battle to beat the virus will leave many scars and memories.
Danny Wood is a principal and founder of SeaCoast Financial Partners in Bradenton. To learn more visit MySeaCoastFinancial.com. The opinions expressed in this material do not necessarily reflect the views of LPL Financial. Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC.