Long Term Financial Effects of the Coronavirus

Dennis O'Keefe |

There is a lot of discussion of how the Coronavirus pandemic might affect us and our economy in the long run. Many are speculating on the various types of companies to buy, or sell, to take best advantage of the situation. 

Major economic and social events have an ability to change us as a culture. I recall growing up around my grandparents who were adults during the Great Depression. They worked modest jobs and lived modest lives. They never took extravagant vacations or owned expensive cars. 

After long and happy lives, they passed on with what, for them, was a fortune. The Great Depression affected them so much they were conscious of their finances every day. While they had a comfortable nest egg, it was never for enjoyment, only for the next potential Depression. 

That pattern repeated itself in large part about a decade ago. 

Fifteen years ago, we were in an economic death-spiral fueled by debt. Not just mortgage debt. Debt in general. Car loans, home loans, credit cards, personal loans - it was all exploding. The economic pundits of the previous 40 years told us that debt was good. It was great if you had a big credit card balance and multiple mortgages. And next year - just borrow more. It was helping the economy! 

The house of cards started collapsing in 2007. Within 2 years we were at the bottom of a massive recession. Bankruptcies, jobs lost, families broken. 

The silver lining of that tragedy is that it changed the attitude of debt for generations of Americans. In the twelve years since the Great Recession, we have come to despise debt. An entire generation or two that grew up thinking that $20,000 of credit card debt was ok finally decided that living debt free was much better. (It is only the youngest of us, those who were in high school or middle school during that time, who are willing to accept this huge debt burden again - most commonly in the form of college debt.) 

Likewise, this latest crisis will change us. We may not be able to see the effects of it for several years, but I’d like to spend a few paragraphs talking about some industries that may flourish and some that may flounder in the coming months and years because of our current circumstances. 

Potential Winners

Right off the bat - delivery, delivery, delivery. From food delivery services to big box stores and online merchants that deliver groceries and other items, we are preparing to reduce the time we spend in our local grocery and home-goods stores. People, like myself, who have been reluctant to embrace the delivery lifestyle are being forced into it just from a safety standpoint. And many reluctant users are noticing that it is easy and convenient - just like they promised. 

Online pre-packaged prescription services, such as those from Amazon and CVS - especially for those with multiple prescriptions - seem ripe to explode. As we age, the number of prescriptions we take increases. And as we age our risk from diseases such as Coronavirus increases as well. Having a system that minimizes our unnecessary contact and breaks down our pills by day and time (in individual packs, no less) has the potential to become very valuable. 

Clearly video-conferencing is exploding. Not just with companies but with families as well. I had my first teleconference with my family last week. It was like a virtual Easter. 

Even with the extended use of these services now, this is another area that has potential to continue to grow after Coronavirus ends. Working from home can become more commonplace provided that productivity is maintained. In addition, work that used to involve flying from city to city is shifting to video-conferencing. (More on that below!) 

Online content (movies & TV shows) providers are exploding at this time as well. Everyone under stay-at-home orders is watching Netflix or Amazon Prime or Disney+ or Youtube or something else. Premium cable networks are so worried about this that they are offering free weekends, weeks and months of service to increase their subscriber base as more and more people move away from traditional television. (Side note: Except for America’s Funniest Home Videos, my 12-year-old son watches zero actual television. All of his content is via online subscription. Think of how differently we will consume movies and “tv” shows in another decade.) 

Potential Losers 

Airlines. As I mentioned in the video-conferencing section above, we are changing how we work. Not only can more people work from home, we are discovering that it may not be necessary to ship people cross-country for meetings and site visits. This can mean thousands, and in some cases millions, of dollars of savings for businesses annually. 

But this is awful news if you own an airline. While we like to think that the air carriers are there to flit us off to Arizona or Florida or Aruba, the reality is that their bread-and-butter is business travelers. If more business is being done online, airlines won’t have full planes. This means potential bankruptcies, reduced routes and possibly higher prices for consumers. 

Cruise lines are taking a beating as well. For good reason. The premise behind a cruise is to visit several ports of call in a luxury setting with wonderful food and amazing service. . . at an incredibly low price. 

What we’ve discovered, even before Coronavirus, is that caviar experience at a canned-tuna price is possible because corners are cut. Cruise lines carry more passengers than ever before - meaning there is less and less time to keep the vessel ship-shape. 
Many outbreaks of disease have been reported on ships over the last several years. Add in the potential for a Coronavirus-type outbreak on-ship and passengers are unlikely to board regardless of price. 

There are two potential outcomes to this: First - cruise lines are business as usual and cruise vacation numbers fall. They may face the same consolidation that the airline industry could see. 

Alternatively, cruise lines could take a bigger stand on ship health safety. This will encourage people to continue cruising but this will come at a price. The days of mega-cheap cruises may be over but could create a whole new industry of “safe” travel. 

Movie theaters are empty right now world-wide. Major new releases are being delayed. But there is still a bigger threat at hand for Hollywood. One we’ve talked about before and one we’ve already discussed today: Streaming services. 

Movie viewership is already down. Coronavirus fears will likely keep many movie-goers away after the virus is conquered. Streaming services can provide some outlet for Hollywood, but the days of the blockbuster may just be over. 

How Should We React? Should we consider making investment changes based on these potential trends? I’d be reluctant to do so. These are broad trends and 100% my opinion. (And companies mentioned in this blog are for example only.) 

But this should make us aware of what changes are coming - both good and bad - from this Pandemic. 

There are numerous other changes that will likely come out of the Coronavirus Pandemic that would take many more paragraphs to expand upon. In the US, I suspect we will see families come closer together. 

Studies, and likely your own anecdotal experience, show that people who spend more time together develop stronger bonds. This may help counteract the disconnectedness that has occurred as we get more and more powerful handheld technology. 

If you have further questions regarding the market or your personal situation or portfolio, do not hesitate to call or simply email me at dennis@successfulmoney.com These are difficult times. You don’t need to go at it alone.

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This blog is the opinion of Successful Money Strategies, Inc. and is provided for informational purposes only and is not intended to provide any investment advice or service.  Statistics and other figures are accurate at the time of original publishing.  Any advice herein should not be acted upon without obtaining specific advice from a licensed professional regarding the readers own situation or concerns.  Always count your change.