The 2000-2002 dotcom bust disproved assumptions that any enterprise could thrive by going online, but gave rise to today’s internet giants and the telecommunications capabilities that have sustained many businesses in recent weeks. The ultra-loose monetary policies that prevented the financial system from collapsing in the 2008 crisis remain with us, but new regulations have helped create a more resilient banking sector.
What could be the enduring impacts of the coronavirus pandemic on businesses? From healthcare to retail to technology, we assess long-term drivers of change.
The rapid spread of the virus and struggles of Italy’s healthcare system – and the ominous challenges facing those of the US, UK and India – have made it clear to many governments that hospitals can’t cope with the speed and scope of the current pandemic.
To respond robustly to further outbreaks, healthcare systems will likely need expertise within the private sector to deliver the following:
These investments will inevitably be fully or partially funded by higher taxes, which will reduce corporate earnings and disposable household income.
Many businesses will have a new appreciation of how suddenly and severely a pandemic can transform the environment in which they operate. To become more resilient, the following measures could be undertaken:
How consumers will spend their money will change, characterised by a conservative approach to personal finance.
This crisis will accelerate and deepen the penetration of technology in the corporate world and delivery of public services.
The corporate landscape that evolves after the coronavirus pandemic will be different to the one we knew beforehand. Like markets, life won’t revert to the mean. Amid the economic damage, there will be innovation and progress, and many businesses will become stronger as a result.
The emerging-markets structural-growth story is driven by an aspiring and growing middle class, increasing digitisation and development by governments through productivity-boosting reforms and infrastructure projects. The widespread disruption caused by the Covid-19 pandemic will change the environment in which businesses will operate in, and this is likely to impact their growth and profitability.
Our focus remains on long-term, structural drivers of growth: the rollout of 5G networks, greater digitisation and applications of the internet of things, rising financial penetration, healthcare and infrastructure development and growing consumer appetite for premium products. We favour quality operating companies in these fields amid the ongoing economic uncertainty, weak commodity markets and potential credit-quality issues.
Taking this perspective, we view the current environment as an opportunity rather than a threat. While we don’t expect markets to gain substantially in the short term, there is potential to increase our exposure to attractively valued companies that can emerge from this crisis by improving their competitive advantage and compound value for investors over the long term.
This information does not constitute a solicitation or offer to any person to buy or sell any related securities or financial instruments.
