(Drivebycuriosity) - This year we experience a very different Christmas. The US & Europe are suffering a new wave of Covid-19 infections with record numbers of known cases & surging hospitalizations. Smart & considerate people stay at home and minimize personal contacts to avoid infecting themselves and others. My wife and I will will skip this night the usual Christmas dinner in a nice restaurant and the following attendance of the Midnight Mass in Midtown Manhattan.
Caution & fear are curbing businesses even more than lockdowns & quarantines ( nber). Many industries, especially physical shops, restaurants & airlines, are suffering. But the US stock market climbed in the recent to new all-time highs anyway. The S&P 500, the gauge for the US stock market, climbed about 14% since Christmas 2019. As usual the market looks ahead. Someday the pandemic will end and the distribution of Covid-19 vaccines has already started - albeit very slowly.
The stock market benefits from the huge government stimulus programs, almost zero interest rates & cheap oil. But important are the tailwinds from the accelerating technological revolution which are spurred by the Covid-19 crisis. Internet - and other software applications - are helping everyone to deal with lockdowns and social distancing. Microsoft`s CEO Satya Nadella said that “two years of digital transformation took place in two months” ( microsoft ). The CEO of Bill.com, an online clearing service, said: "We believe the ongoing pandemic has accelerated the need for businesses to focus on digital transformation” (seekingalph).
The Covid-19 Pandemic changed many habits. The crisis forces many people to work, learn, shop, educate & entertain themselves from home which is fostering digitization and raising efficiency & productivity of the economy ( driveby ). Online sales worldwide are surging, more people are working from home, they are binge watching Netflix & Amazon Prime, listening via Spotify, reading Kindle books, surfing Facebook & Twitter and businesses are running more & more on cloud computing. Not only consumers are changing, corporations adapt as well. We are witnessing an accelerated shift toward digital technologies that are faster, less expensive, more productive and raise creativity.
I suppose that the stock market will continue the climb in 2021 and beyond. Maybe we are at the begin of a new Roaring Twenties, comparable to the boom phase which happened during the 1920s years after the Spanish Flu. Companies restructured and
reduced costs crisis significantly during the recessions of the years
2001/02 & 2008 and the current in order to survive. When Covid-19 is
defeated they will be much fitter and more efficient than before. I
believe that this learning process will continue and will translate into
a long term trend of rising company profits & stock markets.
Happy Christmas!
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