2021 – Year 2 of Covid Outlook

First draft: 13 Feb 2021
Last update: 13 Feb 2021

Here is my outlook for where things are heading in this covid world. Many actually are more longer term then immediate but then speed of change has accelerated lately!

Key Sections

A. Finance
B. Sectors
C. Politics
D. Personal

A. Finance

  • I wrote this section last. Because its tough to see where we are heading
  • Distressed debt: same as most places. Only the big boys survive on the public long side. Current bond docs are so weak in EU and US that only new money benefits from distressed, and that usually comes from the big boys.
  • Inflation up for at least a year
  • Retail takes over control over new mini bubbles as they look to catch the next best thing. Nasdaq worked, Tesla worked, Gamestop worked.  Commodities will work  for a bit.
  • Value comes back in vogue after the first mini bubble burst. Probably need a mix of negative cashflow, fraud and a celebrity getting it very wrong. 
  • Back to office likely to reduce trading volumes, but will that really happen this year?
  • Houses remain the thing to own. Apartments continue to drop in value. Local warehouses – yes those are great too. 
  • ESG finally becomes a cost and not a tail wind. Oil up will be tough for many. A new level of sophistication on the E, S and G side, ranging from reporting, tax transparency, supply chain transparency and board independence

B. Sectors

Tourism:

  • Short lived boost from the Seniors with a vaccination
  • Return to personal bubbles again within a year or two. See healthcare. Only close friends and family personal bubbles. No buffet, no resorts . 

Healthcare:

  • Mental health: Covid moves from being a hospitalisation capacity challenge for countries to a mental health challenge. The long term mental health challenges from the huge pool of preciously infected people will be huge. (Just take a percentage of a total confirmed cases to get an idea as opposed to just daily infection numbers). Researcher are already showing significant mental impairments ranging from smell, fatigue to lack of inhibitions from poor executive functions.
  • The mental health challenge will continue to drain budgets in developed markets.
  • On the flip side neuroscience will get a huge boost into understanding the biology of many mental illnesses which until covid remain classified as “stress induced” or hereditary. Its because of the huge numbers and current coordinated data collection that we will understand how viruses cause changes in the brain.
  • Once the population processes the mental risks surrounding virus, we will go back to friends and family only holiday model.
  • Expect continuous testing for all kinds of viruses on a regular basis

Media:

  • there is only so many Spanish series (very good btw) that Netflix can pull out of their pockets before actors get replaced with avatars with interactive story lines.

Services:

  • Low skilled outsourced activities will face a headwind. Not just because they are easy to switch off but because they create dependence on others hygiene procedures. Those that remain will simply have higher costs. Corona is the new “Compliance” that will favour big over  small players

Retail:

  • Fashion the next big victim of ESG. Organic cotton – actually worse than nylon in terms of water usage. Post initial covid recovery expect less demand but also middle class customers to be more aware about their fashion footprint. Ebay here we come. Its still probably easier to stop buying new clothes than dropping that steak.

Insurance:

  • mental health insurance will suddenly reprice with all the new info, expect an initial panic and sky high pricing

C. Politics

Politics(ST)

  • Question whether covid was from a lab in China will be important. Implications if shown to be the case are huge. Especially for many of the developing nations who have loans from China. Let just say it will be easier for them not to pay. Others make may seek compensation in other ways

Politics (LT)

  • City planning likely to change to self sustainable mega bubbles. Ie you will be free to live your life until you cross the border, thats when checks will be required. Any new infection and a bubble will be cut off from all other bubbles. I guess we can assume this will take a very long time and initially mega bubbles=countries.
  • Western liberties are not very compatible with a need to control virus outbreaks. This may further weaken the western societies. Expect some brain drain with those more afraid and willing to give up privacy to move to Asia.

D. Personal

  • White collar managers at significant risk due to move online. Adapt or sink.
  • Overall age discrimination will explode and accelerate due to it technical skills
  • Longer working hours as a result of WFH
  • Congrats to the first country who will priorities blue collar workers vs white collar in the vaccination order