How Covid-19 has impacted megatrends
On paper, 2021 would likely resemble 2020 or even 2019 provided Credit Suisse is sticking to its six investing “supertrends” it had previously identified - namely anxious societies, infrastructure, technology, silver economy, millennials and climate change - and their related 23 sub-themes. Nevertheless, all of these have come through a few Covid-19 twists. The coronavirus crisis has brought up positive and negative developments for each of the trends, the group stressed in its 2021 Supertrends report, which factored in the 17 United Nations-supported sustainable development goals (SDGs) for the first time.
From angry to anxious
As a first trend, popular discontent keeps rising worldwide but angry societies rather turned into anxious societies as an effect of the Covid-19 crisis, stressed Credit Suisse’s research team when presenting the report to the media.
Reto Hess, head of single security research, equity industrials at Credit Suisse, said the main concerns of citizens worldwide have grown during the Covid-19 crisis. He highlighted the lack of opportunities or limited access to basic needs, rapidly changing work environments, old age funding, housing affordability, healthcare and education.
At the same time, worries about crime and violence, corruption, poverty and social inequality or unemployment have strongly soared too. “No poverty is the first of the 17 UN SDGs. However, the pandemic pushed 71 million people into extreme poverty in 2020, the first increase in decades. Moreover, based on the experience from past epidemics such as SARS or Ebola, inequality can be expected to increase, with lower-income households or low-skilled workers more affected, according to The World Bank,” the report noted.
In Hess’s view, the private sector, including investors, “can provide solutions to address citizens’ concerns.” These do not necessarily entail more government spending but require the right incentives and partnerships, according to the report. One focus he brought up in particular was personal security as he said prevention could become more important as a result of Covid-19. This could provide growth opportunities for healthcare, diagnostic or cleaning and hygiene companies in particular but also insurance, capital goods or infrastructure companies.
Sustainable infra bets
Covid-19 has taken its toll on infrastructure, the second Credit Suisse “supertrend.” Following the pandemic, the group expects from states “greater effort to strengthen the backbone of their economies by overhauling vital transport, power and telecom systems.” The report stressed undergoing efforts to build resilient infrastructure in a bid to trim the risks related to extreme weather events and to replace outdated transport infrastructure that poses safety hazards.
Jens Zimmermann, senior equity analyst, energy & utilities, said US president Biden’s $2.3trn infrastructure as well as the €750bn EU green deal and China’s net zero commitment by 2060 will boost infra companies after a complicated year 2020. On energy, he pinpointed that the market has hitherto focused much on solar, wind energy whereas electricity networks have been neglected so far.
Advent of the ‘touchless’ economy
Uwe Neumann, senior equity analyst, technology & telecom, touched on the digital transformation hastened by the Covid-19 crisis, which has been a catalyst for the information technology sector. He recalled Statista’s forecast of $6.8trn direct investments into digital transformation between 2020 and 2023. From the crisis emerged a “touchless” economy in response to the removal of physical interaction in communication, life and work environments. This trend has benefited companies providing communication tools and devices but these building the tech behind the tools.
“The adoption of such technology has increased materially in recent months. Facial recognition, emotion analysis or optical character recognition are computer vision technologies that improve “touchless” user interfaces. As the adoption of the latter increases, it should create significant demand for artificial intelligence (AI) software, sensors, intelligent semiconductors and other hardware,” the report highlighted.
Regarding the silver economy, Lorenzo Biasio, senior equity analyst, healthcare, said the pandemic has not slowed down the ongoing demographic shift occurring worldwide. The world’s senior population will double to more than two billion individuals by 2050, the Swiss group believes. Biaisio explained that the ageing boom is global as two thirds of the expected growth in the number of elderly are located in Asian markets.
“This shift will create demand, but will also unearth challenges that call for innovative solutions – in healthcare, insurance and consumer and property markets. Throughout the pandemic, several such solutions and technologies saw accelerated adoption and have entered the mainstream,” the report said.
Biasio pointed out opportunities for private wealth advisors and asset managers, in particular in Asia, since under-resourced public retirement systems have not improved through the Covid crisis. Thus, Credit Suisse suggests the private sector has an important role to play in pensions there.
Banking sector, the next disruption
Like their elder counterparts, millennials keep trending too – 60% of the world population is currently aged less than 40 years old – and the pandemic has inevitably forced other age groups to embrace their lifestyle. Julie Saussier-Clément, senior equity analyst, consumer goods, remarked, “we all lived like Millennials during the Covid-19 crisis, shopping, working and socialising online, and paying more attention to our health and the environment.” Digitalisation in the financial sector as well as biodiversity concerns, bolstered by the Covid-19 pandemic, were added as new focuses to the millennial supertrend.
Saussier-Clément said it was worth following digital natives’ behaviour provided its major role in the disruption movement. “What will they disrupt next after media and commerce? Likely banking with the emergence of trading platforms and e-wallets, which will become the trustee advisor at their fingertips. Millennials are mostly in emerging markets now. We stress a few trends in China like Chinese millennials being proud of buying locally made sportswear or spirits,” she argued.
Lastly, climate change has matured as a topic that affects all of us and is “not only a millennial topic anymore,” claimed Daniel Rupli, head of single security research at Credit Suisse. The trend is surging with the help of a huge political momentum (net-zero commitments, EU green deal, and comeback of the US into the Paris Agreement). Rupli also noted a change in individuals’ food consumption habits linked to the sustainability trend.
In Rupli’s view, hydrogen will impose itself as an alternative in several sectors to achieve CO2 emissions cut plans. Green and blue hydrogen market dynamics “should act as a big growth engine” considering the current governmental support and net-zero strategies, the report underlined.