The pandemic caused by the novel coronavirus has tormented the world in an unprecedented manner. The economic engine of most nations has been shut down in order to slow the spread of the virus. The concept of social distancing – unheard of up until three months ago – has become the norm and is expected to remain the norm going forward. The response to the virus can be expected to change some of our behaviors forever.
In this two part article we will analyze the changes we can expect in human behaviour and how will that effect stocks in general Which sectors are poised to do well during and after this pandemic compared to stocks that are not expected to do well for the foreseeable future.
Let us first analyze how Coronavirus is changing our daily habits
1. Ways of conducting business
Until now, work from home was considered for mostly women post maternity or for freelancers. Not anymore. With all the workforce having worked for home for at least 120 days, businesses are realizing that this previously unthinkable way of working is not only possible but required if they want to continue doing business.
Further, it can be immensely useful for them to evolve methods to facilitate smoother working from home. Not only would it decrease traffic and reduce unnecessary travel, it would vastly expand their talent pool and reduce their real estate costs.
While this will reduce the need of office space, it will also reduce the spend on petrol/diesel and also on transportation.
With work from home becoming an accepted practice, businesses would be able to hire talent thousands of miles away from their office and improve their end products – something that they had not even thought about doing so far.
To facilitate this change, companies like monster.com and Naukri.com will have to change the way they operate today.
And less on-site seating requirements would mean need for smaller offices and less expenses on electricity – thus reducing their costs. For employees who are able to adjust to the challenges of working from home, this means of working can become vastly fulfilling as they can save a lot of time and use it for personal fulfilment.
This means less spend on office furniture but increased spending on home furniture. While real estate prices will fluctuate for commercial properties, residential real estate should not get impacted from this change.
2. Reduced travel
Requirement for travel –for both business and personal reasons – is expected to decline drastically. Continuing from the point made above, when organizations get used to conducting meetings online, not only can they save time but costs on travel, both local and international, as well.
Even non-official travel will reduce as people may reduce expenditure on tourism and travel only when visiting family or when necessary.
People are slowly realizing that a lot of the “necessary” business travel could have instead just been a zoom meeting. Zoom has replaced and will replace what would have otherwise been millions of day trips for business travellers over the next few years.
With a reduction in travel, there will be less spending on hotels, airlines, cars, car maintenance, airbnbs, restaurant etc. People would prefer to move outside the city and not worry about office commute. They would like to splurge on a bigger home away from all the hustle bustle.
3. Reduced discretionary expenses
This lockdown has brought to fore what is essential in people’s lives. All non-essential workforce has been asked to work from home, non-essential items were not being sold in the first two phases of the lockdown, and non-essential services were similarly not operating.
Due to the lockdown measures, people are being forced to break habits and live without things they thought they couldn’t live without.
This, coupled with the possibility that incomes will decrease, could very well result in decrease in discretionary spending. While it will be important for people to buy groceries and basic hygiene necessities, other purchases ranging from lifestyle personal products like high end clothes and fashion accessories to durable goods like cars and homes will be pushed for later.
Even those who purchase these goods may prefer the ones which are cheaper than the ones they would have bought otherwise. People would go on fewer vacations and those destinations may be different and cheaper than the ones they would have initially planned.
Activities like eating out, watching movies, going to the theatre or stand-up comedy shows, or sporting events would be greatly reduced. People may prefer to make use of OTT platforms for entertainment in order to safeguard themselves and their families from contracting the virus and to save money.
Food delivery apps like Swiggy and Zomato had already found a lot of favor with consumers before the pandemic due to convenience and discounts. This trend is expected to continue as people may prefer ordering in food.
4. Personal splurge
With more time available and money not being spent on trips/ expensive meals and expensive clothes, people are going to splurge on themselves. For example buying that expensive coffee machine that you always wanted, buying the side table that you have been eyeing for quite some time. Or even buying your favorite phone and PS5 gaming console etc.
People will learn how to deal with less social interaction by buying more stuff that entertains them at their own home. Did you know the bicycles have been out of stock in the US for quite some time? Cigarette smoking has drastically reduced. People are buying exercise machines and at home gyms. Demand for online education is at an all time high. People are spending more time at home so they are doing multiple home improvement projects.
While there are no direct stocks that will benefit from this, but home improvement and electronics retailers are expected to do well
5. More time for introspection
The biggest change and the most important of them all
With people sitting at home and not going out as freely as they used to, they will have a lot more time to rethink their priorities and goals of life. People will start passion projects, they will pursue hobbies, spend more time with family and friends as well as maybe even adopt pets. They will rekindle old friendships and relive the memories.
When you have nothing else to do, you are forced to sit at home and you have some extra cash, you splurge on yourself and your loved ones. You will have time to learn the language you always wanted to learn, talk to the friend you havent had time to talk for the last 10 years and maybe even clean your house for a change 🙂 – While these habits wont affect any stocks directly, but take some time off and learn yourself. You might never find this time again
Overall, while we are all living though this pandemic, take some time off and see what is most important to you. Start a business, follow your passion, learn something new, talk to old friends and relive your childhood memories. Take care of your physical and mental health. Take this opporunity to redeem yourself. All this will be over soon and you wont have time to talk to your friends and family or follow your dreams – Again.