The same changes are happening, just faster

If there is a consensus about anything, it is that the world we emerge to post-GVC (the Great Virus Crisis) will be different from our pre-GVC world. We will, we are told, find that in both big and small ways our world has changed direction. We aren’t so sure. There were already huge shifts in global economies, politics, markets and for that matter, lifestyles, under way. It looks to us as if the crisis will not change their direction. It will just speed them up. 

That’s true of smaller things: significant numbers of people were already working from home, for example – after the summer more will do it and more often than they did in January. The same goes for things such as cash usage: we were all cutting down anyway – this just gets us used to a digital world faster – for good or bad (see my blog for more). But it is equally true of the big stuff. 

We have written here before about the new Cold War (between the US and China) and the economic and political decoupling that involves. The antagonism between the two nations – and the worries about their supply chain interdependence – has not been created by the virus panic. But it has most certainly been exacerbated. 

You can say the same about the general reversal of the core ideas backing globalisation – that people and goods should be able to move around the globe more or less freely. War aside, there has surely never been a time in which barriers to the movement of people have been flung up faster. Nor has protectionism arrived quite so fast: who would have thought that in 2020 Germany would be banning exports to Switzerland (a shipment of face masks was stopped in March)? 

Other things that looked like they were on the way already, but may well come much faster than they would have otherwise, include helicopter money and debt forgiveness (see last week’s issue and also our podcast with Russell Napier at moneyweek.com). Finally, there is of course the stockmarket crash itself. This would have happened anyway. Not as quickly and not as terrifyingly, of course, but one way or another probably just as nastily, given the level of debt in the system and the high valuations in the US.

Are we there yet?

Is it over? We aren’t convinced. We know that some stocks are cheap and that buying low-debt stocks for the long term is probably a good idea. But given the incessant flow of bad (and worsening) news on earnings and dividends, there could be worse to come. Note that bear markets can be cruel tricksters – seven of the FTSE 100’s ten biggest one-day gains in history turned out to be nothing but bear market bounces. 

With that in mind, where should you position your portfolio? With the very resilient only. Max King looks at some options (many of which I hope most readers will already hold) this week. He is particularly keen that you stay invested in innovative technology stocks – something Matthew Lynn agrees with: this week he explains why long-term investors should be looking at space stocks. And rather at the other end of the scale, Matthew Partridge suggests looking at Shell (with a stop loss!). Finally, houses. If you are finding, as I am, that lockdown in the city is getting you down, perhaps it is time to start browsing some less crowded options. We have a few ideas in this week's issue of MoneyWeek.