The equity market, represented as an individual person wants to move higher, is optimistic and ready for whatever’s next. This outlook is powered in part by low interest rates and by a COVID-19 induced bifurcation of corporate winners and losers. Technology broadly represents some of the big winners, and old-line retail represents some of the losers – generally companies that had not and could not adapt to the new environment.
The economic impact of COVID-19 seems to be an accelerant for changes that were already underway. For example, old-line retail was not doing a fabulous job pre-COVID-19, the move to virtual everything just pushed them to the brink, some beyond – think Lord & Taylor, J.C. Penny, and Neiman Marcus. Meanwhile Amazon as no real surprise to anyone using Prime which has more than 100 million subscribers is leading the way in retail seemingly built for this type of environment, and some traditional brick-and-mortar, i.e., Walmart and Target are finding ways to adapt, for example Walmart’s Pickup and delivery especially for groceries.
So what can we glean from this? Some of the trends mentioned above were already in place pre-COVID-19, and what can we do to move forward? We can look to identify trends that may increase the probability of us making intelligent capital allocation decisions and we can move in that direction. As far as where the market is going, I have no idea.
Best regards,
Rodney
August 25, 2020