Lockdown Macrotrends

Posted By Darren Winters on Oct 31, 2020

Lockdown Macrotrends

Could we see post lockdown macrotrends emerging from covid?

The psychological impact of the pandemic could result in changes to behavioral consumption patterns, which could last longer than the virus itself.

Throughout history every major event has had a psychological fallout, it took an entire generation to get over the frugality that was brought about by the Great Depression. So, the 2020 pandemic Great Depression II is likely to have a long-lasting impact on an entire generation.

For investors the likelihood of post lockdown macrotrends emerging from covid, a debt pandemic, is real.

The macroeconomic trends which were already underway before the pandemic have accelerated in the post-pandemic era. I have coined the 2020 pandemic a debt pandemic for good reason. We have witnessed parabolic moves in Fiscal expansionary policy, monetary easing, and corporate debt. Global fiscal actions have amounted to $12 trillion. Moreover, the major central banks in cahoots expanded their balance sheets by $7.5 trillion. But it is not only government borrowing that has hit record levels so too has corporate borrow ballooned since the pandemic. 

The high-grade supply of corporate bonds is forecast to top $1.7 trillion and $350 billion on “junk” rated bonds in 2020.

It is changing in behavioral consumption patterns for stock investors where we could see profitable macrotrends emerging from covid

Lockdown Macrotrends

The 2020 pandemic global lockdown has widened the wealth gap. Richer countries able to borrow their way more cheaply out of the crisis have experienced less of an income, revenue shock with debt making up the shortfall. Meanwhile, poverty rates famine is rising for the first time in decades in less developed economies. But even within wealthy economies, the wealth-income gap between low income and high-income groups have widened further in the 2020 pandemic.

Those with assets have benefited the most from the $7.5 trillion monetary stimulus which has succeeded in reflating asset prices. 

Widening wealth gap is likely to lead to greater political instability. But Modern Monetary Theory, the financing of Universal Basic Income with central bank digital currency, a central bank app on a smartphone, could be one way of getting emergency funds to desperate citizens, thereby preventing a hunger uprising. 

The macrotrends emerging from covid concerning the mode of transport within the context of this widening wealth and income gap is visible from private jets to second-hand cars

Demand for private jet travel is booming amongst the high-income group in this two-tier economy. While commercial traffic is running about 15% to 17% of last year’s totals, private flights are running at up to 70% or more than normal, according to industry data and Private Jet Card Comparison. Private jet companies are seeing a record number of new customers who have never flown private. Growth is being driven almost entirely by new customers drawn to flying private because of health concerns and lower jet prices. NetJets says it is spending over $1 million a month on keeping its aircraft interiors virus-free 

Approximately, 85% of business travel is back to normal and some private-jet charter companies are even running above their year-ago numbers. Charter and helicopter service is up 600%

I believe we will see a V-shaped recovery in air travel as soon as quarantines are lifted, bearing in mind the average age group is younger, least affected by the virus

Cruiseliners with their older age group, the recovery will be slower. 

Macrotrends emerging from covid concerning the mode of transport for lower-income groups could be shifted from public transport to second-hand automobiles. So, while new auto sales have been sluggish to recover demand for second-hand automobiles is booming

From day one, May 11th, we had a 50% growth compared to the previous year. We thought it wasn’t going to last, that it was just customers who hadn’t been able to buy during the lockdown. But it didn’t stop, we ended June with a 59% increase,” said Ivo Willems in the newspaper Le Soir.

So, another major player in the sector also did well in June. “We had a very good month. It got off to a normal start, but sales picked up at the end of the month. We met our objectives,” explains Frédéric Vassamillet, the company’s sales manager. But the number of new cars registrations in June remained almost 2% below last year’s level. Customers prefer second-hand cars due to a lack of confidence, according to Traxio, 

For the time being, people prefer individual transport to public transport. 

Thriftiness, frugality could be one of the top lockdown macrotrends emerging from covid, bearing in mind that over ninety percent of the population derives their living from wages and not asset appreciation

Based on data from the doxo INSIGHTS Bills Pay Impact Report across 1,568 sampled households, three themes emerge:

  • 57% of consumers’ incomes have taken a hit in the past seven months 
  • 70% have delayed discretionary spending on big purchases 
  • 75% continue to be very worried about their future financial health 

Rising household delinquencies could be another lockdown macrotrends emerging from covid

Over a quarter (27%) of U.S. consumers report having missed a bill on their auto loans, followed by 26% for utilities and 25% on cable or internet costs.

The average cost of the above three-bill types is $258, but that’s still a fraction of the two most expensive bills, mortgage or rent, which come in at $1,268 and $1,023 respectively.

So with households, corporates, and governments up to their necks in debt sluggish growth could be another one of those lockdown macrotrends emerging from covid. The cost of servicing ballooning government, household, and corporate debts could weigh down on future growth for a generation unless the debt is inflated away or forgiven.

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