Netflix. The tech giants. The mega-corporations. And the US. The stockmarket has already decided who will be the long-term winners from the coronavirus crisis. It only takes a glance at the way prices have moved over the last month to see that a few firms, sectors and countries are coming out ahead, while others, such as small companies and emerging markets, have been pummelled.
But hold on. In truth, we still know almost nothing about Covid-19, and even less about its long term impact on the global economy. The market has been wrong plenty of times before and it looks to have got this crisis upside down as well.
Today’s winners may yet lose
Take Netflix for example. It has done brilliantly this month, adding 16 million new subscribers in a few weeks. But in six months’ time it will have no new shows, so will all those people stick around or will they cancel? And competitors like Disney-Plus have used lockdown to get a foothold in the market (with bored kids at home, paying £5.99 per month looks like a great deal to many parents). Netflix is no longer the only streaming service around, and that is going to make staying ahead of the competition a lot harder and a lot more expensive. Or how about Amazon? Again, it has had a great crisis so far, extending its reach and customer base. But as it looks more and more like an essential utility, it may face more regulations.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
And despite the market rebound, is the US really the big winner? It looks like having the worst death toll from the virus, and the most incompetent response. There may be a huge political reckoning for that over time. The US is not a global leader any more in the way it has been for much of the past century: there is no sign of a Manhattan Project to cure the disease, or a Marshall Plan to fix the global economy. Instead it may well have just surrendered global leadership to China, and it will emerge significantly weakened.
Likewise, are emerging markets a loser? Sure, they have been hammered by investors, their currencies are weak and they will suffer from the slowdown in global trade. Still, so far they have not seen anything like the same infection rates as the developed world. Vietnam has yet to record a single death from Covid-19, and seems to have stopped it from spreading. Eastern and central Europe have done far better than western Europe, with countries such as the Czech Republic re-opening schools and shops even as borders remain closed to prevent the disease coming in from Germany and Italy. Younger populations and tougher governments may mean those countries escape relatively unharmed, and their economies can bounce back far quicker than a developed world that will see massive death rates and will end up crippled by debt for generations.
Change favours the small
And should big companies really outperform small ones? Sure, in the first instance stronger balance sheets mean they can come through this crisis in far better shape, and their muscle means they will be first in the queue as economies start to re-open again. But during unprecedented periods of change, it is usually smaller companies that adapt quicker than huge corporations.
They are more flexible, and can switch from one business model to another. And when sales move online, as they have done in this crisis, that favours small firms, because the playing field is suddenly level. Specialist, artisan food and drinks manufacturers, small restaurants, tiny fashion designers and niche publishers and broadcasters find they can beat the global giants even with fewer resources. And once they get established, they won’t go away.
Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years.
He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.
Trading terms: The Santa Rally
Glossary Will the Santa Rally result in its traditional December effect on global markets?
By Dr Matthew Partridge Published
Lock in high yields on savings, before they disappear
As interest rates peak, time to lock in high yields on your savings, while they are still available.
By Ruth Jackson-Kirby Published
Halifax: House price slump continues as prices slide for the sixth consecutive month
UK house prices fell again in September as buyers returned, but the slowdown was not as fast as anticipated, latest Halifax data shows. Where are house prices falling the most?
By Kalpana Fitzpatrick Published
Rents hit a record high - but is the opportunity for buy-to-let investors still strong?
UK rent prices have hit a record high with the average hitting over £1,200 a month says Rightmove. Are there still opportunities in buy-to-let?
By Marc Shoffman Published
Pension savers turn to gold investments
Investors are racing to buy gold to protect their pensions from a stock market correction and high inflation, experts say
By Ruth Emery Published
Where to find the best returns from student accommodation
Student accommodation can be a lucrative investment if you know where to look.
By Marc Shoffman Published
Best investing apps
We round up the best investing apps. Looking for an easy-to-use app to help you start investing, keep track of your portfolio or make trades on the go?
By Ruth Emery Last updated
The top funds to invest in - November 2023
Tips Investors are focused on income strategies and FTSE heavyweights. We look at what investors have been adding to their portfolios in the last month
By Vaishali Varu Last updated
The world’s best bargain stocks
Searching for bargain stocks with Alec Cutler of the Orbis Global Balanced Fund, who tells Andrew Van Sickle which sectors are being overlooked.
By Andrew Van Sickle Published
Revealed: the cheapest cities to own a home in Britain
New research reveals the cheapest cities to own a home, taking account of mortgage payments, utility bills and council tax
By Ruth Emery Published