Who Is Keeping Us From Getting Back to Normal? By: Gabriel PotterMBA, AIFA® 2020.05.12

After the tragedy of 9/11, key industries were forced to rearrange their security measures and standard operating procedures to react to the additional threats.  Few people asked, “when are we getting back to normal?”  It was understood that the world had changed, and the old ways were never coming back.  The gravity of the event forced capitulation.

The threats we are facing with COVID-19 have generated policy adjustments in response to the pandemic.  However, this threat is different because it comes with a suggested expiration date.  It is entirely conceivable that life could be roughly back to normal within two-years, pending the global proliferation of a safe and effective vaccine.  Therefore, there is an additional level of frustration from many industries and business operators who are, quite justifiably, impatient to get back to normal operations.  Most businesses could not survive two years of an enforced lockdown, and that is assuming we are ultimately able to create a vaccine for the novel coronavirus.

The more salient question for individuals and businesses should instead be, “how do we live with this additional threat for the next year.”  While lockdowns were enforced by their governors, business operators could cathect their anger towards government policy makers as the cause of their hardship. However, the early data coming back from states which have emerged from lockdown is, thus far, suggesting that economic activity is going to be materially suppressed even without a mandate from state and local governments.  Low margin businesses – like restaurants – need to be operating near capacity to generate profits.  If a moderate proportion of the population – say, 50% - are avoiding eating out, then there simply won’t be enough demand to keep them afloat.  Famously, some countries, like Sweden, have avoided lockdowns entirely and used the honor system to encourage, but not enforce, social distancing.  While the downturn for Sweden has been less severe, there has still been a pullback in economic activity on par with neighboring nations which did enforce a lockdown.

After 9/11, the airline industry was forced by government mandates and customer expectations to provide safe travel.  Cockpit doors were now secured during flights, greater authority was bestowed upon flight crews, the TSA was established, and so on.  Over time, confidence – and consumers – came back to an industry reeling under a terrible shock.  The response to this threat should be no different. The businesses and industries to thrive (and take market share from competitors) will be those that generate confidence.  Which restaurants can deliver food without customer contact?  Which hotel chains demonstrate the best cleanliness and room sanitation?  Which airlines provide adequate personal space?  Which theme parks conduct thorough health screenings of patrons?  Which office buildings generate adequate air ventilation to ensure a safe environment?  We may not be able to return to the old ways immediately, but the economy can thrive if the businesses can adapt to the new threat.

Gabriel Potter

Gabriel is a Senior Investment Research Associate at Westminster Consulting, where he is responsible for designing strategic asset allocations and conducts proprietary market research.

An avid writer, Gabriel manages the firm’s blog and has been published in the Journal of Compensation and Benefits,...

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