The fast view
- The pandemic-related lockdowns have created a demand and supply side shock across the US, which has been met with unprecedented levels of government stimulus.
- This has driven an artificial consumer environment, muddying recovery trends and leaving little visibility on the true consumer recovery.
- Analysts and investors expect a V-shaped recovery, yet for the recovery to be sustained either the US government must provide further stimulus, or the unemployment rate must revert to prior levels.
- To weather such uncertainty, we believe investors are better placed to rely on secular trends to capture outperformance within the consumer discretionary sector.
- There are four emerging, structural changes post-COVID-19, which we believe will drive the sector and for which we are positioned:
- Acceleration in e-commerce penetration
- Faster shift from wholesale to direct selling
- Increasing de-globalisation of supply chains
- The shift of consumer spending away from ‘out-of-home’ to ‘in-home’ experiences and home improvement
- We explore how these themes could provide long-term investment opportunities and re-shape industries.
Is the worst yet to come?
The US has been no exception to the human tragedy caused by COVID-19 and, as the biggest consumer market globally, understanding events here is crucial for investors. Economic stimulus has created an artificial environment in terms of consumer spending and the labour market.
Almost half of Americans have received a one-time payment and the average unemployed American will earn over 50% more income out of work than in work until the end of July. This makes it difficult to identify the scale and duration of the underlying demand and supply side shocks caused by COVID-19, let alone the shape of the future recovery. It appears then we are in the eye of the storm as it has a feeling of calm, but is the worst yet to come?
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