We look at the industries for those most affected by social-distancing and stay-at-home orders.
To stop the spread of the pandemic, many governments issued stay-at-home orders and social-distancing guidelines. This new way of life kickstarted existing trends like working, shopping from home, and at-home entertainment. Some sectors have benefited, while others were severely hurt.
A year later, markets have largely recovered, but the economic impact of the pandemic remains. Here, we look at some of the sectors and industries that have fared best and worst over the past year.
Travel Demand Expected to Rebound in Second Half of 2021, with Full Recovery by 2023
Travel was one of the hardest-hit sectors in the last year. Social-distancing guidelines and stay-at-home orders decimated travel plans for many people.
Airlines may continue seeing headwinds as families opt for local vacations and car trips, rather than cross-country or international flights. And corporate travel will likely lag leisure travel as videoconferencing becomes more commonplace.
Technology Benefited the Most from the Pandemic
The pandemic accelerated existing trends. People shopped from home, sought entertainment at home, and 45% of U.S. workers said they worked from home in 2020, compared with 9% in 2019. Technology names like Amazon.com AMZN, Netflix (NFLX), and Microsoft (MSFT) benefited from these trends, and the tech sector soared in 2020: The Morningstar US Technology Index was up 47.5% in 2020 while the Morningstar US Market Index was up 20.9%.
Technology was both a safe haven and a growth area for investors, says director of technology equity research Brian Colello. Wide-moat software businesses like Microsoft and Salesforce (CRM) have sticky customer bases: White-collar workers didn’t stop using Microsoft Office, and sales representatives didn’t stop using Salesforce while working from home. Colello also says secular growth drivers like the shift to cloud computing, which involves the outsourcing of IT workloads, have continued during the pandemic, creating tailwinds for Microsoft’s Azure platform, for example. Semiconductor and computer hardware manufacturers benefited from a near-term boost in IT spending as companies equipped their employees for work from home.
Communication Services Benefit From Advertising Rebound
Advertising spending was one of the first places businesses went to cut when the COVID-19 downturn hit the U.S. This could have spelled trouble for social media platforms like Facebook, Twitter (TWTR), Snapchat (SNAP), and Pinterest (PINS), whose revenues rely heavily on advertising demand. However, as shopping from home and e-commerce surged, online advertising rebounded.
A Tale of Two Stories for Retail, Food, and Auto
Retail had a mixed performance in 2020. Companies with a strong online presence captured customers shopping from home while those struggling to grow their e-commerce suffered. Department stores like Macy’s (M) were struggling to go into the pandemic and have been hit hard while Amazon continued to dominate throughout 2020. The COVID-induced housing boom has created tailwinds for home improvement companies like Home Depot (HD) and Lowe’s (LOW), which have done very well, as DIYers have looked for projects around the house while under stay-at-home-orders.
In automotive, our analysts projected pre-pandemic that over 16 million light vehicles would be sold in the U.S. The actual number was much lower at 14.6 million.
Healthcare Remains Stable
Despite a global pandemic, the healthcare sector didn’t experience as much volatility as the other sectors. Drug manufacturers will likely have goodwill with U.S. regulators because of their quick vaccine development, which may help them avoid price reforms in the near future.