Monday, May 4, 2020

BlackRock: "5 ways the world could change: An investor watchlist"

The writer is a BlackRock Managing Director.
So many companies that put out this type of commentary end up posting vacuous pablum, sort of like the Harvard Business Review before Justin Fox came in as editorial director and started getting his writers to get more specific rather than the airy-fairy stuff that had marked his predecessors content.
Likewise for the BlackRock blog.

There are actionable points made rather than something that looks like compliance stripped the life out of the commentary. One example, and it is just an example, in this piece is point 2 below. If you get the urban/rural question right, and get your bets down you won't have to make too many other macro decisions for the rest of your life.

Think John Templeton going into Japan at 2-3 times earnings and riding that market 40-fold.
Catching the big trends makes the rest of this stuff a bit easier.

From BlackRock's blog:
The global coronavirus outbreak has changed everyday life in profound ways ― and will likely reshape the future as well. Tony DeSpirito identifies five areas of change that could have implications for investors.

Market volatility never feels good. The kind we’ve felt amid the coronavirus pandemic has been particularly taxing. Of course, this is no ordinary moment in history. It will be a defining moment for individuals, businesses and industries worldwide.

Long-term stock investors know they are buying into the perceived future value of a company. That’s exactly why it’s important to look past the next few weeks to the months and years ahead. Chances are the world will look very different than it did when we started 2020 ― and that can mean new doors for investors to explore.

In a previous post, I spoke about creating a shopping list for your portfolio for the more immediate rise out of the crisis. Today I’ll focus on five areas I think may look very different as the world recalibrates from a health crisis that tested every aspect of daily life.

1. Technology to power a low-contact world
Technology was a strong performer before the crisis and is well poised to be a winner going forward. The crisis has turbocharged trends already in motion: remote offices, online education, online gaming, and streaming. We expect these and many more manifestations of a virtual life, now widespread and embraced, will only accelerate, and the software and infrastructure to support them will be in increased demand.
Beyond that, technology to power contact-free activity of all sorts could benefit. Consider driver-less delivery, telehealth and eSports. 5G could also get a boost as speed of data transfer becomes a more imminent need in remote work settings.

2. Global vs. local debate
To the extent countries look inward to care for their populations and economies, we could see a move from the decades-long trend of globalization to regionalization or localization. U.S.-China trade tensions had already incited questions about the location of global supply chains and risk of concentration. Coronavirus intensified the attention.

Supply chains will need to diversify to enhance their resilience. Many countries will likely look to bring manufacturing home. Yet shifting from a concentrated to a more diversified supply chain will come with costs. Companies can either absorb these costs (which would hurt profitability) or pass them on to consumers by charging higher prices for end products (which would be inflationary).

A subplot to this global vs. local dynamic is urban vs. rural. The virus outbreak has been hardest felt in dense urban areas. These are also business centers. We could see a shrinking office footprint as populations gravitate away and remote workforces grow. Meanwhile, less-urban areas could benefit in several ways: onshoring of manufacturing would likely go to these areas; the ability to work remotely means people can relocate from urban hubs; and retirees who preferred culture centers like New York City may see disadvantages of dense areas and look to more rural settings....