Working from home could have a profound effect on the structure of economic growth, Mr Yu says, with “significant investment into the economy” required to create jobs.
However, SSGA’s Mr Hentov says: “Continued fiscal relief packages could limit the long-term damage and a quick return to trend growth is possible, maybe even slightly higher given widespread productivity improvements during the Covid-19 crisis.”
Damian Handzy, head of research at Style Analytics, says the pandemic has been “both damaging and disruptive – and investors must pay attention to both aspects”.
“The economy – not the market – will be suppressed for several years and at the same time Covid-19 is disrupting industries,” he says. “Companies that can adapt to people’s changed lifestyles can thrive. The US approach of solving problems by innovating will help its economy come out of this ahead of others.”
A consumer-led recovery?
The retrenchment in economic activity has undoubtedly hit the US hard. But with many people saving up money and paying down personal debt during the pandemic period, Ian Jensen-Humphreys, portfolio manager at Quilter Investors, says the US consumer could prove vital to a near-term recovery.
“Once confidence is restored and the pandemic is fully in the rear-view mirror, helped by recent vaccine announcements, the economy could receive a shot in the arm,” he says.
However, Bo Brownlee, portfolio manager at Secor Asset Management, argues that investors should be wary of putting too much emphasis on a cyclical recovery fuelled by positive vaccine news. Technology companies are likely to continue to lead the market in the next two years, he says, with cyclicals and financials lagging “despite an expected strong snapback”.
Some sectors, especially retail, have likely been permanently damaged by the events of 2020, Mr Brownlee adds, while others face a “slow road back as behaviour normalizes” – in particular airlines, hotels, and office rentals.
“While these stocks have enjoyed the euphoria surrounding the good news on the vaccine front, it is no sure thing that their rally has any legs to carry them through the next few years as we emerge from the pandemic,” he says.
For Cormac Weldon, head of US equities at Artemis, the consumer-led investment picture is bright for the US – but the recovery path “is likely to be uneven”. Air travel is unlikely to return to normal before 2022, he predicts, while there are “many steps between the current lockdowns and plazas full of carefree consumers”.
“Employment data has been impressive to date but will soften in the short term,” Mr Weldon adds. “That said, job creation in stronger sectors – manufacturing, housing-related, technology, health care, grocery stores – should absorb some of this weakness.”
