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Dramatic Shifts in the Way We Live Are Reshaping the Markets

 

August 28, 2020

 

IN A FEW SHORT MONTHS, THE CORONAVIRUS has made working from home so familiar that “many employees are wondering if they’ll ever work from work again,” says Lauren J. Sanfilippo, Vice President and Market Strategy Analyst for the Chief Investment Office (CIO), Merrill and Bank of America Private Bank.

 

The shift to working from home is just one of many dramatic changes in consumer behavior highlighted in a new report from the CIO: “The Great Reset: Work, Play and Live in a Post-Coronavirus World.” The paper, co-authored by Sanfilippo, anticipates an economic recovery in late 2020 and into 2021, driven in part by a wave of home-buying by a more digital workforce. 

 

“Changes in the way we live, work and play will affect different sectors in varying ways, with some coming out ahead and others potentially losing ground,” notes Sanfilippo. Here’s a quick look at how those changes could impact your investment decisions.

 

“Changes in the way we live, work and play will affect different sectors in varying ways, with some coming out ahead and others potentially losing ground.” —Lauren J. Sanfilippo, Vice President and Market Strategy Analyst for the Chief Investment Office, Merrill and Bank of America Private Bank

Rethinking how we work

Nearly a third (31%) of workers employed in early March went remote by early April, according to the National Bureau of Economic Research1, and an IBM study2 found that 75% of adults would prefer to continue to work remotely at least some of the time after the pandemic retreats. Moving forward, as the unemployment situation slowly begins to improve, remote jobs are likely to be higher skilled, higher paid positions, Sanfilippo says. “This in turn should support a stronger future consumer.”

 

While workers in vulnerable industries such as travel, leisure, and brick and mortar retailers will likely need retraining, “areas such as manufacturing, housing, technology and health care are leading the early stages of an employment recovery,” says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank.

 

In the new remote workplace, businesses in areas ranging from teleconferencing, communications services and cybersecurity to tech hardware and casual clothing should benefit. Transportation companies and small businesses that support commuters or that produce business clothing are likely to struggle, Sanfilippo adds.

 

Reimagining how we live and play

Fueled by low interest rates and a focus on social distancing, home-buying among a key demographic group, 35 to 44 year olds, is expected to return to growth for the first time in 14 years.3 BofA Global Research estimates that the housing industry should reach pre-coronavirus levels by late 2021.

 

“Areas such as manufacturing, housing, technology and health care are leading the early stages of an employment recovery.” —Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank

In terms of entertainment, streamed on-demand programming should continue to benefit, while theme parks and theaters struggle. Meanwhile, auto sales, including electric vehicles, should get a boost as “cooped-up” Americans seek travel options that offer a degree of separation.

 

What it all may mean for your investments

Despite the challenges, “what remains clear is that consumers are on the path to rebuilding and should prove their resiliency along the way,” Hyzy says. “We currently favor stocks over bonds overall,” he adds, with a preference for large U.S. companies and disruptive innovation companies. Yet bonds remain an important way to balance a portfolio, he adds, and the uneven nature of the recovery places added emphasis on a diversified portfolio.

1 Brynjolfsson, Erik, et al. “COVID-19 and Remote Work: An Early Look at U.S. Data.” National Bureau of Economic Research. June 2020
 

2 IBM, “COVID-19 is Significantly Altering U.S. Consumer Behavior and Plans Post-Crisis”, May 1, 2020
 

3 Census Bureau, BofA Global Research, Data as of June 2020.
 

Information is as of 08/28/2020.

 

Opinions are those of the author(s), as of the date of this document and are subject to change.

 

Investing involves risk including possible loss of principal.

 

Past performance is no guarantee of future results.

 

The Chief Investment Office (CIO) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions oversight and data analytics. CIO viewpoints are developed for Bank of America Private Bank, a division of Bank of America, N.A., (“Bank of America”) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S” or “Merrill”), a registered broker-dealer, registered investment adviser and a wholly owned subsidiary of Bank of America Corporation.

 

Asset allocation, diversification and rebalancing do not ensure a profit or protect against loss in declining markets.

 

Equity securities are subject to stock market fluctuations that occur in response to economic and business developments.

 

Bonds are subject to interest rate, inflation and credit risks.

 

Investments in a certain industry or sector may pose additional risk due to lack of diversification and sector concentration.

 

Investments in foreign securities (including ADRs) involve special risks, including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are magnified for investments made in emerging markets.

 

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