Life After COVID-19

COVID-19 has provoked substantial behavioural changes. The big question for investors – what will the lasting impact of these societal changes be?

To help provide a glimpse into the future, we’ve drawn upon the latest research and expert opinion across five key areas to understand where the biggest repercussions could be felt – and where the most important opportunities may lie.

How we live

Of all the areas that COVID-19 has thrown a spotlight on, nowhere has shone brighter than our own homes. The lockdown experience forced consumers to use their homes as spaces for working, teaching, fitness and play. Now, as a result, many are reappraising what they value and prioritise in a property. An example of this a growing desire to have access to more outside space – a trend that is already playing out in real estate markets.

According to research from Savills, 73% of experts across its global network predict that demand for green spaces for urban buyers will increase. The firm also found that a further 61% believe demand for property in rural areas is set to rise¹. This could have an obvious impact on demand dynamics and the value of these properties once the market gathers steam again.

But it’s not just where consumers choose to live that is changing; underlying this is a change in how they live.  Many consumers established new domestic routines during the lockdown period – some of which are influencing long-term behaviours. Indeed, UK research shows that two in five people think that they have changed their ways for the better, as a result of being forced to spend more time behind closed doors.

One area where this is expected to have a longer-term impact is in the wellness and fitness industry. A survey in the US revealed that billions of dollars’ worth of consumer fitness spending is expected to shift in-home and away from fitness clubs.² This could open up new opportunities for investors.

Consumer demand for home fitness equipment has already exceeded supply in many instances, pointing to growing opportunities to cater to this market. Elsewhere, businesses in the fitness industry may need to up their technology and streaming capabilities in order to service this new cohort of consumers effectively².

This trend could also have implications for the commercial property market. While reduced footfall in fitness spaces – particularly if social distancing rules remain in place or return in any subsequent spikes – could potentially hurt both operators and landlords³ there may also be new opportunities to acquire prime properties if the physical footprint of the fitness industry is scaled back.

“What remains to be seen is how quickly these factors establish themselves as long-term trends, but what will be important is the ability to spot negative factors quickly and to react to new opportunities.” Listen to Steve speak to a panel of experts about London Prime Property.

You can tap into these emerging opportunities – and others – with support from Barclays. Our Discretionary Portfolio Management services allow you to delegate the day-to-day running of your investments to our expert team in a way that’s aligned to your goals.

How we shop

The lockdown experience has taken consumers on an accelerated journey of digital adoption that would normally take years, in just eight weeks – and this has had a major impact on the way we buy goods. Stuck at home, at computers, and with many shops closed for business during the COVID-19 lockdown, an online retail boom was always inevitable. But the extent to which it would last beyond lockdown was less certain.

Research from PwC shows that, instead of pining for the physical in-store shopping experience, many consumers have been won over by the convenience of e-commerce. The findings suggest that 18% expect to buy even more online after the lockdown experience. That rises to almost a third among under 25s. This could have knock-on implications for physical stores in sectors such as fashion and beauty aimed at younger buyers⁴.

Some retailers’ efforts to expand their online presence could also be accelerated, following the success of what PwC describes as ‘forced experimentation’.

But it’s not all about the shift to online shopping. Restrictions in movement have  encouraged people to rediscover their neighbourhood shops, and 22% of UK consumers say they will now spend more money on local high streets than they did before the lockdown⁴.

As shopping habits evolve, so could the way retail properties are leased. A survey by Colliers International shows that over 40% of commercial landlords are now more likely to consider footfall, trading turnover and how physical sites help to generate online revenue when determining rents for tenants⁵.

It’s also important to consider not just how we’re shopping, but what we’re shopping for. Looking further afield, learnings from China point to how changing consumer behaviours as a result of COVID-19 could impact demand levels for certain goods.

One example is in sales of customised products, which experts say are rising due to consumers being more cautious in their purchase decisions. Expensive home furnishings are seeing heavy demand as people spend more time at home, while bikes and electric motorcycles have also notched huge sales growth. And, in one reflection of the impact of mandatory mask wearing in public, lipstick sales have seen a decline while eye make-up purchases are on the rise⁶.

How we live well

As well as adapting how we shop and keep fit in a post-COVID world, there’s also evidence of a growing demand for more preventative health measures. Research shows that 73% of consumers around the world are planning to eat and drink more healthily as a result of COVID-19⁷.

Since the pandemic began, personalised nutrition start-up Clear Health Programme has seen interest spike in its data-driven programmes – and that interest isn’t just coming from consumers; it’s also coming from other businesses in the health and wellness sector, such as gyms and hospitals, who are keen on offering their customers personalised care outside of their premises⁸.

According to Sam de Boo, President – Western Europe at Ecolab, the global leader in water, hygiene and infection solutions, the pandemic has also put the spotlight on the role (and importance) of hygiene in infection prevention among businesses and consumers alike. He says global consumer surveys show that restaurants, stores and other indoor places have to take safety measures and effective hygiene procedures to help guests feel safer, more confident and to return to pre-pandemic behaviours.

“We’re taking a holistic approach.” Says Sam de Boo. “We’re helping a range of industries – from retail and hospitals to manufacturing and tourism – to protect people against the virus, providing efficacious virucidal solutions, training and protocols tailored to individual business environments.”

Meanwhile, healthcare facilities themselves are getting smarter – indeed, the European Commission has introduced the EU4Health €9.4 billion fund to build further preparedness and create a healthy stock of the critical supplies⁹.

Elsewhere in the healthcare space, medical technology looks likely to be in the ascendency following COVID-19. New solutions have been fast-tracked and adopted in response to the crisis – most notably driving AI-led innovation in areas such as vaccine development and disease track and tracing¹⁰.

There has also been a renewed focus on transforming the patient experience to shift from a physical one to a virtual one. It's this area in particular that momentum is expected to continue long after the pandemic is over. Already health leaders are hailing a lasting legacy of innovation. The chief executive of NHS Digital in the UK says that some healthcare technology deployed to combat COVID-19 is “here to stay”, adding that she expects patients will want to continue using new technology and remote care¹¹.

How we work

Our working lives are another area of huge significance for a post-COVID world.

Despite being forced to work from home, many employees have successfully managed to balance productive output with busy home lives. As a result, there’s an expectation that this will translate into a long-lasting desire to work more flexibly.

A survey by getAbstract shows that nearly 43% of full-time American employees want to work remotely more often after the economy has reopened¹², while experts have said that the traditional 9-5 could become harder for employers to justify¹³. Given the opportunity this creates to cut the costs of office space and the productivity benefits of a happy workforce, a longer term change may be welcomed by an increasing number of employers too.

Of course, many employees will eventually return to their original places of work. But they are likely to do so with a heightened awareness of safety concerns. Businesses are already starting to redesign offices to address the new standards required and to make employees feel safer.

Short-term measures are likely to be quick to implement – such as barriers and more spaced out workstations. Longer-term, and depending on the duration of necessary safety measures, some businesses have shown an interest in switching from a large centralised office model to having groups of smaller offices closer to people’s homes. Not only could this help reduce reliance on public transport, but it would also cut the need for lots of people to self-isolate if one employee caught the virus¹⁴.

How we learn

The rapid shift to online learning during the crisis has, like the adoption of online shopping, forced a broad group of consumers – both students and those using additional time at home to learn skills – to consider the merits of a digital education experience¹⁵.

This, in turn, is accelerating a long-standing move towards digital learning among academic institutions. Cambridge University has already announced that all its lectures will be online-only until Summer 2021¹⁶, signalling an increasing acceptance of digital learning, and a longer-term continuation of this trend.

And, as COVID-19 pushes more people towards online education, new innovations in remote teaching are expected to emerge. One of these is in a greater degree of personalisation, with adaptive learning technologies being tipped for further development in the coming years. This could include AI-powered tutors, which assess students and deliver instructions tailored to the individual, being adopted on a much broader basis throughout the education system¹⁷.

Developing tools to support effective peer-to-peer learning, where students help each other to learn through feedback, guidance and collaboration, could also move higher up the agenda. The COVID-19 pandemic has illustrated how a lack of personal contact can make it more difficult for educators to give effective one-to-one feedback. At the same time, remote studying can have a detrimental impact on learning communities and social interaction among students. Placing a greater emphasis on peer-to-peer learning has been suggested as a solution for both these issues – both now and in the future¹⁸.

Seeing opportunities beyond the pandemic

The COVID-19 pandemic has had tragic health impacts around the world, and has also proven to be one of the most disruptive economic events for decades. But what’s clear is that it’s important to avoid any rash decisions to sell.

Structural changes such as the ones outlined here can often generate and develop new markets that adaptable businesses can address and capitalise on.

We believe that maintaining a long-term approach to your financial goals is essential. One of the most effective ways to do this is to remain invested in a diversified portfolio, and our Discretionary Portfolio Management services can help you to stay on track.

Our consistent high conviction, low-cost approach to investing has been generally rewarded through good times and bad. Rather than trying to time economic cycles, we focus on building a high-quality portfolio aimed at standing the test of time with an appropriate level of risk control.

The portfolio is heavily invested in digital goods and services, which are part of positive long-term trends that are likely to see accelerated levels of adoption as a result of the COVID-19-related restrictions placed on businesses and everyday lives.

It may have been a turbulent first half of the year, but the performance of our Flagship Multi-Asset Portfolio has generally remained attractive. As a result, we feel our strategy has offered investors some much-needed resilience in one of the most difficult times in recent history.

Past performance is not a reliable indicator of future performance,

For more information, contact your Private Banker.

Key Investment Risks for our Discretionary Portfolio Management services

Investment Risk

The risk of loss for the Portfolio resulting from fluctuations in the market values of positions in the Portfolio attributable to changes in market variables such as interest rates, foreign exchange rates, equity and commodity prices, or an issuer’s creditworthiness. A degree of market risk is inherent in all investments. Portfolios are monitored to ensure that they are consistent with the defined risk profile.

Liquidity Risk

Liquidity risk is the risk that a position in the Portfolio cannot be sold, liquidated or closed at limited cost in an adequately short time frame.

Counterparty and Credit Risk

The risk of loss for the Portfolio resulting from the possible default or downgrade of a counterparty on its obligations prior to the final settlement of a transaction or contract.

Concentration Risk

The risk of loss because of the concentration of exposure to a specific instrument, individual transaction, industry or country. Factors considered in the setting of the limits applied to the portfolios may include the following: • Investment objective and policy •Mandate restrictions

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Any circumstance where there is a potential or actual impact to the Portfolio resulting from inadequately controlled or failed internal processes, people and systems or from an external event. The impact can be financial, including incurring either a loss, or in some cases a financial gain and can include non-financial (e.g. Conduct or Reputational) consequences. The definition of operational risk includes but is not limited to breaches of regulations or contract, business continuity disruptions, accounting and technology incidents.

Currency Risk

The risk of loss for the Portfolio resulting from changes in the exchange rate between the base currency of a Portfolio and the currency of any asset held in that Portfolio which may lead to depreciation of the value of the assets expressed in the base currency.

Interest Rate Risk

Each Portfolio may have exposure to fixed interest securities. The value of such securities is sensitive to changes in interest rates. The value of Shares is likely to fall if interest rates rise in the medium to long term, and vice versa.

High Yield Security Risk

Generally, medium or lower rated securities and unrated securities of comparable quality offer a higher yield than is offered by higher rated securities but also will be likely to have some quality and protective characteristics that, in the judgment of the ratings organisations, are outweighed by large uncertainties or major risk exposures to adverse conditions and are predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal in accordance with the terms of the obligation.

The market values of these securities tend to be more volatile than that of higher quality bonds. They also present a higher degree of credit risk. The risk of loss due to default by these issuers is significantly greater because medium and lower rated securities and unrated securities of comparable quality generally are unsecured and frequently are subordinated to the prior payment of senior indebtedness.

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