There's no such thing as returning to the pre-pandemic economy
Federal Reserve Chairman Jerome Powell recently said that the U.S. economy has been permanently changed by the COVID pandemic. "Those changes range from the increase in remote work, to restaurants offering more take-out meals, to real estate agents learning to show homes virtually," Powell noted. "Many companies have already made large investments in technology to adapt to the challenges that the pandemic has presented. Heavy investment by companies in new technology means there will be more jobs in the future associated with maintaining that technology but also potential job losses in industries focused on in-person contact... This trend is already showing up in the jobs data, with the recovery slower in industries that rely on public interaction, such as travel, leisure and hospitality." (1)
At WT Wealth Management we agree. We're not going back to the economy that we had before the pandemic. It simply doesn't exist anymore and never will again. We are watching carefully as the economy continues to navigate the pandemic and constantly changes. The Investment Committee at WT Wealth Management strives to understand and anticipate what the future implications are for how people work, learn, shop, stay fit and even socialize – post pandemic.
Front line retail, hospitality and service jobs will be substantially reduced over the next several years. We already see more self-check-out lines in the grocery store, kiosks where you enter your own order in fast food giants like McDonald's, direct check-ins while on vacation, etc. Robotic delivery of packages from UPS and FedEx cannot be all that far off. What's next?
As investment managers we are always trying to understand and determine the next culturally significant lifestyle adoption in order to position our clients to take advantage within their portfolios. In order to accomplish this, the entire WT Wealth Management team has become aggressive readers, passionate learners and in many cases early-adopters of technology like Amazon, Netflix, Zoom, Robinhood, DocuSign, PayPal, Expedia, Uber and Airbnb.
As an example, perhaps the greatest "disrupters" in our lifetime have been ride share services such as Uber and Lyft. That's a large claim when you consider the internet, the smart phone, email, video conferencing and the ease at which we now shop, bank, date and even seek medical advice online.
To further illustrate, let's review some history on the NYC taxi-medallion. "In 1962, the market value of a medallion was $25,000. By 2005, an individual medallion was approximately $325,000. . . By 2010, the market value of a medallion was $600,000. It peaked in 2013 at over $1,000,000. However, as quickly as, 2015, the price had fallen to approximately $650,000. Today one can now purchase a medallion for less than $150,000. In fact, on July 11, 2019 sixteen medallions were offered at auction, three of which sold for $137,000, $136,000 and $138,000, while another thirteen medallions had no bidders." (2)
The fact, that a NYC medallion went from one of the most expensive and coveted items in NYC transportation to not even having any bidders is truly remarkable. It appears that Uber and Lyft alone have changed the business of hailing a cab in less than 10 years.
Many of us remember the days when Woolworth, Kodak, Sears, Polaroid, TWA and Oldsmobile were great American success stories we thought would last forever. They could have survived had they been more adaptable to change. They proved not to be adaptable and the world moved beyond them. Change is not new. In fact, "the only constant in life is change." Anticipate it. Prepare for it. Understand it. Embrace it. Invest in it.
If you would like to discuss more, please reach out to your WT Wealth Management advisor to schedule an appointment in person, by phone or via remote conference. We look forward to the exchange.
- Fed's Powell: There's no returning to pre-pandemic economy.
- Taxi medallion.