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The great lockdown:

one year on

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David Lerche

Chief Investment Officer

It’s now just over a year since our lives were abruptly disrupted by South Africa and the rest of the world going into various degrees of pandemic lockdown. While it now brings a wry smile to think we believed then that we’d be restricted for only a few weeks, it’s in our view more interesting to examine how people’s lives have changed across the globe over the past year. Which trends are likely to be temporary, and what may have changed for good? And how does this impact our investments?

The experts say it takes people 62 days on average to form a habit, so given the duration of the lockdowns worldwide, we’ve had ample time to adapt our behaviour. In many ways, in both our work and personal lives, our behaviour has indeed changed. However, we’ve yet to see whether some of these changes will be merely temporary, or if they’ll become more long-lasting. Overall, our view is that human nature essentially tends to remain unaltered – the only permanent changes to society are therefore likely to be those in which we’ve seen an accelerated adoption of ideas and activities that were already gaining traction before the pandemic started.

Across the world, consumer spending patterns have altered – some permanently, such as the sharp jump in online shopping. Others may be more temporary, like the shift away from services towards goods. Savings rates in the US and the European Union during 2020 were among the highest on record. This trend, coupled with pent-up demand and the reopening of borders and economies, may well result in the sales of durable goods starting to suffer as the pendulum starts to swing towards services again.


From an investment perspective, it’s important to note the distinction between recognising a trend and being able to make money out of it. In our view, two questions need to be asked:

1) Which changes are permanent, and which may be temporary?

2) What do share prices reflect as being either permanent or temporary?

It is in finding these mispricings, where the market is pricing a stock for a certain situation to continue into perpetuity, but where things may well turn out differently, that both opportunities and threats for investors lie.

For example, investing into building supply companies simply because people have redirected spend towards their homes over the past year appears to be a poor idea, for two reasons: first, the news is already in the market and share prices are reflecting this, and second, we view this trend as a temporary phenomenon.

While recent data from McKinsey suggest that ‘home nesting’ (spending on home alternations and décor, gardens and home gyms) will remain elevated, we are sceptical. People may spend a bit more on their homes as they work from home, but much of what has been purchased over the past year is in the form of durable goods, so this should start to cool in 2021.

Throughout the pandemic, people who have spent time and money on improving their home environment (those who’ve been able to keep their incomes relatively intact) have had the financial ability to do so since the portion of household budgets normally allocated to entertainment and travel spend has largely been saved. As life normalises, we expect this to reverse.


While it’s obvious that global travel will increase from current levels, it’s not clear if or when it will return to 2019 levels. Leisure travel will recover in time, but in our view there’s been a permanent decrease in the level of business travel. Now that corporates understand (and are comfortable with) just how much can be achieved via online communication, and how much money can be saved on travel expenses, coupled with the improved use of employee time, we expect much stricter company travel policies.

We see clear changes already evident in company policies and attitudes towards working from home. As corporates allow a greater percentage of their employees to work from home, this has multiple knock-on effects:

  • Companies will require less office space, reducing demand and thus prices. This is likely to be felt most strongly in core office nodes in major city centres worldwide.
  • This then drives lower demand for city-centre apartment accommodation.
  • Demand for suburban space has increased. This may be most keenly felt in areas previously considered marginal for city workers living there. In a South African context, this is a positive development for towns such as Stellenbosch and Franschhoek, Muldersdrift and Ballito, while internationally, it could affect areas like Guildford in the UK and Long Island in the US.
  • The many small businesses that cater to office workers, from coffee shops and pubs to hairdressers and tailors, will certainly be impacted. I would hate to own a formerly thriving coffee shop in Sandton, for example, or a formal menswear retailer in Central London.

Our guidance here is human nature: people will likely return to what they like to do, but will resist the things they’re less fond of. We want to travel to exciting destinations, but flying overnight to Frankfurt in late November for a single meeting can probably be avoided. We want to enjoy meals with friends, but we most likely won’t miss the daily commute to work. Some people love to shop, so malls will remain, but many others will shop online. Human nature doesn’t change.


This brings new dynamics for businesses. Big brands should do better, as fewer people are likely to walk past the boutique shop with the funky clothing. So smaller brands will become more dependent on online retail platforms, as well as on digital marketing and influencers.

True product brilliance will likely see greater rewards from the move online. Many people now feel much more comfortable ordering goods from international platforms. Why settle for the offerings at your local, non-specialist outdoor store when you can get Mammut or Patagonia gear online?

People’s attitudes to education have certainly shifted. Most parents have realised that while school is of course useful for education, it is also fantastic as day care, so we see little change in this sphere. Rather, the trend towards online education for tertiary-level studies looks to have reached critical mass. Again, this should benefit the big brands. The world’s top universities need no longer limit their intake according to available lecture-hall capacity, but can now massively scale their businesses with little extra cost. While you could attend a South African university online, you could just as easily obtain a degree from Oxford or Harvard if you can afford it.

At government level, there have also been major inroads. In many countries, the pandemic has increased calls for greater levels of social support, but the news media in general has yet to recognise the consequences of higher government spending and debt, as well as changes to societal freedoms.


Returning to investments, while we know that the world is never so simple as to allow for clean categorisation, we can broadly group companies into four ‘buckets’ in terms of the current trends:

  • Companies with a clear long-term benefit from the lockdowns (e.g. Amazon, online learning)
  • Companies with likely only a temporary benefit as people’s consumption patterns have adapted (e.g. building supply companies, furniture retailers)
  • Companies with likely only a temporary setback (e.g. brewers, leisure travel, hospitals)
  • Companies likely to experience long-term problems (e.g. retail property companies, corporate travel).

The market has already factored in a recovery in travel-related shares such as Sabre and Booking Holdings due to pent-up demand, but to us it seems incongruous that those stocks that benefited from the shift in consumption spend to (often durable) physical goods appear to be pricing in a continuation of the trend. My snazzy new branded sneakers look great, but they’ll last a few years yet, and I doubt I’m alone in planning to shift my spend over the next year back towards consumption and travel.

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