by Fenimore’s Investment Research Team
This past week, the White House decidedly turned its attention to reopening the economy and issued a set of guidelines titled “Opening Up America Again.” This plan, along with news of a potentially effective COVID-19 therapy from Gilead Sciences, caused the S&P 500 Index to finish in the green for the third time in four weeks.
While there is uncertainty around the timing of when the economy will reopen, our new “normal” could be very different. Looking ahead, the degree of “different” can range from subtle changes to dramatically modified consumer behavior.
Think about pre- and post-9/11. We accepted a lot of new security checks in our way of life to help protect against terrorism. It’s quite possible that in the future Americans will get used to having their temperature scanned before being allowed onto an airplane or into a crowded venue.
To help Fenimore focus on the right questions and data when considering investments, our analysts have gathered their thoughts on how consumer and corporate behavior could change as the economy moves forward. These are not predictions, but rather a useful exercise to help us hold or add companies we believe have staying power or newfound promise, and avoid those that have the greatest uncertainty.
We’re pleased to share our thoughts with you.
- Less Personal Contact: Prior to the coronavirus, online shopping, food delivery, telemedicine appointments, and contactless payments were becoming more The outbreak likely accelerated the adoption of these behaviors.
- Homeward Bound: Industries that require face-to-face interaction or close proximity with strangers could see reduced demand for prolonged periods. This includes travel (hotels, airplanes, cruise lines), live entertainment, restaurants, and movies.
- Travel Trends: For those who do travel, brand reputation may become more important than ever when making choices. Additionally, more travelers may decide to drive in order to avoid airplanes, public transportation, and even ride-sharing services.
- Suburban Sanctuaries: After being locked down in an 800-square-foot studio apartment in a dense city where social distancing is difficult, the appeal of homes in the suburbs may increase.
- Reducing Risk: This is the second economic crisis in just over a decade for many younger Americans who started their careers before the Great Financial Crisis. This could lead to less risky behaviors with regard to personal debt and career choices.
- Protecting Others: People may actually stay home when they’re feeling sick.
- Working Remotely: Stay-at-home orders forced businesses to fully adopt the already growing trend of “work-from-home.” This may become a standard operating practice for many.
- Teleconferencing: Handcuffed by travel restrictions, companies are learning that technology can replace some travel. This could result in sustained reductions in business travel.
- Supply Chains: The shutdowns quickly revealed the complexity and depth of supply chains. We could see companies move quickly to diversify and exert greater control over these operations, with the potential for more “onshoring” or bringing production back domestically.
- Automation: Already a growing trend, automation will likely become an even higher priority for manufacturers. Fewer workers reduces the spread of illness.
- More Cash: The lower interest rate environment over the past decade has led more companies to increase their use of debt. Forced shutdowns could reverse these views and businesses may maintain more cash on hand to hedge against future stoppages.
This is not an exhaustive list of potential behavior changes and there may be other consequences that no one is thinking about today.
While we can’t be certain about future behavioral patterns, Fenimore’s Investment Research Team continues to focus on what we can control. We seek quality holdings that are adaptive, innovative, and durable regardless of the circumstances. We remain optimistic that our portfolio of businesses should continue to successfully navigate the ever-evolving landscape.
If you’d like to speak with an associate, please call 800-721-5391 or contact us via email. Thank you.