“The coronavirus is not just a temporary crisis, it’s a permanent disruptor.”
Head of Thematic Investing
BofA Global Research
Amid the pandemic, it’s natural to wonder when life will go back to normal. Yet that question, however understandable, may be misplaced. “The coronavirus is not just a temporary crisis, it’s a permanent disruptor,” says Haim Israel, Head of Thematic Investing at BofA Global Research. “It’s one of those rare events in history that will completely reshape geopolitics, societies and markets.”
In “The World After Covid,” a new report from BofA Global Research, Israel details five megatrends affecting everything from geopolitics to healthcare to technology. In some cases, the virus has sped up trends that were already underway, but might have taken five years or more to unfold without the pandemic, Israel notes. And despite the health and economic devastation, many of these changes will be positive, he believes.
Ground-breaking technology research and development will be coronavirus’s legacy of innovation, says Israel. Government priorities, for instance, could shift towards better health systems and a greater resolve to head off the looming crisis of climate change.
Here are the five trends Israel believes will shape our lives—and create potential investment opportunities—going forward.
1. Geopolitics and Globalization
Expect rising tensions between the U.S. and China. Tectonic shifts in supply chains, from globalization and toward localization, were already well underway before the coronavirus. The pandemic will likely result in “a much faster-than-expected shift in manufacturing away from China,” Israel says, with the goal of reducing dependence on China in critical areas such as technology and pharmaceuticals. A greater focus on sustainability and social and environmental issues is also helping drive the trend away from globalization.
2. Tech Wars
The battle for technology supremacy between the U.S. and China will likely intensify in a new world accustomed to online entertainment and shopping, and where the need for tracking data to avert future health crises is greater than ever. “The lasting legacy of this will be a combination of new communication infrastructure, data generation, cloud computing power, and bandwidth,” Israel believes.
3. Big Government
The coronavirus has handed governments a newly expanded social mandate to protect their citizens. Expect greater government surveillance aimed at stemming future outbreaks, and new debates over the greater social good versus individual privacy. Governments might also influence businesses focused primarily on shareholder returns to improve worker benefits and serve the needs of other stakeholders—including a greater emphasis on solving climate change and other environmental challenges.
4. A Greater Focus on Health
The coronavirus will amplify the importance of healthcare and the critical role it plays in national security and economic growth, Israel says. He believes the debate around universal healthcare is likely to intensify in the U.S. Globally, the push will be on for “a more efficient system that focuses on value-based outcomes, preventive care and greater use of technology,” he says. Globally, look for health systems that reduce waste and emphasize value-based outcomes, preventive care and technology.
5. The New Consumer
Gen Z is uniquely prepared for a new era of social distancing. As the first generation of digital natives, these younger consumers are comfortable in a world that takes place largely online. Other generations have adopted their digital ways during the lockdown. Many of these new habits are likely to stick, which has implications for business strategies going forward. On the other hand, younger consumers are at the greatest risk of reduced earnings in the wake of the crisis, he adds.
To learn more about these five post-coronavirus trends and the industries that could benefit, read the BofA Global Research primer, “The World after Covid”.
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