One of the few winners in the COVID-19 outbreak has been the digital stay at home companies. Companies like Netflix, Amazon, Facebook, and all companies that are in the tech sphere have generally seen their usage increase. The so-called ‘FANG’ stocks have seen investors flock to them on the expectations that their revenues can continue fairly strongly during the lockdowns. In a world where the major connection for people is digital, it makes sense that digital, tech-led companies gain. Furthermore, many companies are finding that their workforce is more than able to fulfil their responsibilities from home. It will not be a surprise if we see less investment in large office buildings in the future. Companies will not only realise the hidden value of a home-based workforce but also start to work harder on the digital transformation of the future.
The spread of COVID-19 seems to be accelerating trends in the way people live. Many people are thinking through the way they organise their lives and it is difficult to see all behaviour returning to exactly how it was pre-COVID-19 even if a successful vaccine is discovered. In fact, the need for new solutions in a locked-down world has encouraged the digital world to really double down on transformation.
Is a post-COVID-19 world digital?
A question on Bloomberg’s markets live blog this week was will a ‘digital reboot sustain after virus?’ It’s a good question. This is a hard one to know the answer too. However, at the very least some businesses have seen that a digital run business can operate more than adequately. Consumer habits will have changed, will they ever return to post COVID levels? We shall see. The initial impact of COVID-19 shutdowns sent the tech-led Nasdaq close to its dot.com bubble peak relative to the S&P500. See the Bloomberg chart below:
The Nasdaq has also made new record highs recently on the expectation that tech companies offer one area where earnings should hold up. How sustainable is this? Is this rise to continue or is this a bubble ready to burst? Companies are now investing heavily in digital transformation in the hope of being part of a new transformed digital age. The question is will the hopes of that age actually deliver in a post-viral world? For investors who think the answer to that is yes, then the tech-led Nasdaq would be an obvious vehicle to try to ride that trend.