“A bend in the road is not the end of the road…Unless you fail to make the turn.”
― Helen Keller
Since the beginning of the pandemic and as the capital markets began to rise in response and expectation of a solution the outcome had been stated as the new normal. And as the new normal perpetuated an ocean of theories, some conspiratorial, over the last year it has evolved into simply a return to normal. But as I mentioned in recent commentaries, the notion that remote work will dissipate, online buying will weaken, and everyone will want to fly on a plane and take a cruise is ignoring the clear potential for the opposite. Not to suggest the pandemic will resurge, or that a return to socializing won’t, but that there is increasing evidence that people will continue many of the health related habits gained from this experience. This, in my opinion, calls into question the notion that shifting investments from growth to cyclical growth is the best way to allocate a portfolio.
For example, a number of such stocks have run to new highs, including the indexes they rest in, portfolios have simply moved in step. This is because while the strategy to invest in the consumer, infrastructure and finance maintains a focus on the future, holdings in technology, including global internet retail, semiconductor production and healthcare, with a focus on life science technologies and pharmaceutical companies focused on specific heath issues, lagged. The reason was they were uninteresting to the new army of investors many ignorant of the fact that stocks that are overbought, don’t require a reason to decline, although that hasn’t stopped a narrative hungry media. And if they are companies with strong balance sheets, stable growth margins and a product base that feeds a widespread need irrespective of economic and heath conditions they will eventually begin moving higher, as they’ve done for us this week.
So where does that leave us. The string of comments from airline and cruise companies that bookings are way up remains uncertain until earnings come out and even then starting from near zero during the pandemic will unlikely ease my skepticism, and that the expected goal of normal will be more likely the new normal. Likewise, the recent comments from older energy executives outlining their goal to focus on alternatives to traditional resources as part of their long term strategy is in keeping with another new normal, renewables. And no one is unaware of the explosion in the global automobile industry racing to be the next Tesla (TSLA). I could go on; industrial objectives are changing, political objectives are changing, financial objectives are changing, all on a global scale, in the name of the new normal. So, why not people too?