Investment strategy in the post-pandemic world

Sectors that are poised to benefit

The COVID-19 crisis will end at some point. No one can predict exactly when, but unless the virus magically fades away in the heat of summer, I don’t believe we will see the end of this until two things occur.

First, we need to develop an effective treatment for serious cases. That will reduce the death toll and ease the stress on the healthcare system. It appears from everything I’ve read that a treatment is likely closer than a vaccine.

The second stage is a vaccine that is effective and widely available at a reasonable cost. We need something that can wipe out this virus, in the way other vaccines eliminated polio and smallpox. Only then will people feel comfortable socializing again. Unfortunately, from everything I’ve heard, we’re a year away from that, even in a best-case scenario.

Only when we have a treatment and a vaccine can the process of rebuilding the world’s economy begin. That means governments are going to be stretched to their limits in providing the fiscal and economic stimulus needed to keep us going until we turn the corner.

When we finally emerge on the other side, we’ll be faced with massive debt problems at all levels. But those are issues for another day.

So, what will the world look like when the crisis ends? Much different than before, I expect. Months of sheltering in place will fundamentally change our lifestyles and will continue to influence the way we live and do business, long after the coronavirus is history. Here are some of the changes I expect.

More work from home

In the space of a few weeks, we’ve discovered that jobs no one thought could be done remotely can be handled very effectively with a laptop computer and video conferencing. I spoke the other day with a senior executive in the insurance industry who told me his entire office is now working from home and that, so far, it is working well.

There are many reasons why this trend might continue post-crisis.

It would reduce costs for cash-strapped businesses through the reduction or elimination of office space and its attendant costs. Teleconferencing will reduce the need for business travel, another cost saver. Commuting costs would be cut – a walk to the home office beats hours in a car or on public transit.

Of course, not everyone can work from home. Construction workers will still be needed on job sites. Staff will be needed in grocery stores and pharmacies. Delivery service drivers have become essential to our new lifestyle. We’ll still need police, firemen, pilots, and others to report to work. But many white-collar jobs that are now being done from home will remain there when the crisis passes.

The losers in this scenario will be office REITs and the energy sector. With fewer cars commuting to work, the demand for gasoline will drop – as we’re seeing now.

The winners will be technology companies, who will continue to make the whole work at home process easier. Microsoft Corp. (NSD: MSFT) is a great example.

Expanded use of on-line commerce

I’ve ordered a few things from Amazon and Walmart in recent years, but they’ve been a small part of my shopping routine. Now I’m in quarantine, having returned to Canada recently, and I’ve started to order groceries online. It’s been a frustrating experience – thousands of others are doing the same thing, and the systems are overloaded. But based on news reports, the major grocery chains are hiring staff and gearing up to handle the sudden, sharp increase in demand.

Once that happens, I can see myself foregoing the weekly trip to the supermarket. Why take the time and the effort, especially when the weather is miserable, when everything you need can come to your doorstep? I’m sure many other people will feel the same way.

The winners here will be those companies that offer good prices, prompt delivery, and user-friendly websites built along the Amazon model. Delivery companies will also prosper in the expanded eCommerce economy – think FedEx Corp. (NYSE: FDX) and United Parcel Service Inc. (NYSE: UPS).

The losers? Brick-and-mortar stores and retail malls, which were suffering before any of this happened. REITs that specialize in retail should be avoided.

An accelerated move to robotics

Robots can’t catch COVID-19, or anything else. While the rest of us stay home, they can keep factory output going with a minimum of human intervention.

This trend is already been well-established. In mid-2019, a report from Oxford Economics projected that 20 million manufacturing jobs around the world will be taken over by robots by 2030. That could accelerate as the world emerges from the crisis, although much will depend on how much capital spending businesses can afford.

The rise of robotics is a two-edged sword. On the one hand, it will improve productivity and reduce the economy’s vulnerability to future pandemics. On the other, it will leave millions of people without work. Managing that crisis will be a real challenge to business and governments.

One of the companies that should benefit when this trend takes hold is ABB Ltd. (NYSE: ABB). It’s is a Swedish-Swiss company based in Zurich that trades as an American Depository Receipt on the New York Stock Exchange. The company is a world leader in robotics, industrial automation, clean energy, and software development.

The stock has not performed well recently, but the company appears to be well-positioned to emerge as a winner in the post-coronavirus world.

I’ll look at some more possibilities for the post-COVID world in a forthcoming article.

Gordon Pape is one of Canada’s best-known personal finance commentators and investment experts. He is the publisher of The Internet Wealth Builder and The Income Investor newsletters, which are available through the Building Wealth website.

Follow Gordon Pape on Twitter at https://twitter.com/GPUpdates and on Facebook at www.facebook.com/GordonPapeMoney.

Notes and Disclaimer

The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting, or tax advice. Always seek advice from your own financial advisor before making investment decisions.