Investors are hungry for a Covid-19 vaccine that can deliver a return to normal. That day may never come.
“We’re recovering, but to a different economy,” Federal Reserve Chair Jerome Powell said Thursday during a virtual panel discussion hosted by the European Central Bank.
It’s clear the pandemic has accelerated the use of technology, remote work and automation, Powell said. This will have lasting effects on how people live and do their jobs.
What comes next: While advances in tech are generally positive for societies over the long term, on a short-term basis, they create disruption.
“Even after the unemployment rate goes down and there’s a vaccine, there’s going to be a probably substantial group of workers who are going to need support as they’re finding their way in the post-pandemic economy,” Powell said.
Such anxiety is shared by top business leaders as they look ahead.
“If there is a resurgence of confidence and growth, my concern is how evenly distributed [it is], and who gets left behind,” Viswas Raghavan, JPMorgan Chase’s chief of the Europe, Middle East and Africa region, told me in a interview this week.
Some of the world’s biggest companies have already made changes to their business that will reverberate long after the pandemic is brought under control.
Take Disney, which reported its financial results on Thursday. The entertainment giant, which has had to delay the release of expensive blockbusters and shutter its parks for months on end, swung to a loss of $2.8 billion in its most recent fiscal year. The previous year, it hauled in $10.4 billion in profit.
Disney isn’t just sitting on its hands, however. During the pandemic, the company has made big investments in its Disney+ streaming service, which now has nearly 74 million subscribers. Last month, it announced an internal reorganization that moves the service toward the center of its media empire.
“I think you’re going to see that we’re going to put a lot of wind in the sails of our Disney+ business and heavily invest in it,” CEO Bob Chapek told analysts on Thursday.
The need to pump cash into new parts of the business has costs, though. Disney has announced layoffs of tens of thousands of workers this year. Lower-paying roles in the company’s parks division have been particularly vulnerable. Disney has indicated it could eventually rehire workers, but has not made any firm commitments.
Powell worries some Americans may be left behind. On Thursday, the central banker said he’s particularly concerned about where “relatively low-paid, public-facing workers in the service sector” will find themselves after the crisis.
“Those people are going to struggle to get back to work in their old jobs, or in many cases in new jobs,” he said.
Not there yet: While positive vaccine developments are encouraging many people to look ahead to later next year, the near-term is due to bring even more pain. The United States reported more than 153,000 new Covid-19 infections, a record, on Thursday. Chicago has issued a stay-at-home advisory as officials across the country consider fresh restrictions.
Trump bans Americans from investing in some Chinese firms
President Donald Trump may be on his way out the door, but he isn’t done ratcheting up tensions with the world’s second biggest economy.
On Thursday, the president signed an executive order banning Americans from investing in Chinese firms that the administration says are owned or controlled by China’s military.
The order applies to 31 Chinese companies which the US government says “enable the development and modernization” of China’s military and “directly threaten” US security.
Smartphone maker Huawei and Hikvision, one of the world’s largest manufacturers and suppliers of video surveillance equipment, are among the blacklisted companies. Some of the other companies listed, including China Telecom and China Mobile, trade on the New York Stock Exchange.
What it means: Trump’s order prohibits Americans from directly owning shares in the companies or investing in them through funds. Investors will have until November 2021 to divest from the firms.
Investor insight: Shares in Hikvision dropped more than 4% in morning trade in Shenzhen on Friday, before paring back some of those losses to fall 1.5%. Shares in China Telecom plunged nearly 8% Friday, and China Mobile shed 5% in Hong Kong. Huawei is a private firm.
Paul Triolo, head of geotechnology at consultancy Eurasia Group, said in a recent note to clients that Beijing would be “on guard for the Trump administration to take some hard parting shots.”
But it’s not clear the relationship will improve significantly once Joe Biden takes office in January. Beijing congratulated Biden on his victory Friday.
“The US suppression of China will be inevitable,” former Chinese finance minister Lou Jiwei said Friday, per Reuters.
Is it time to invest in bank stocks again?
A historic recession and rock-bottom interest rates have translated to a tough year for bank stocks.
While companies like JPMorgan Chase and Bank of America have made clear they’re on solid footing, with plenty of capital on hand to make it through the pandemic, the economic outlook has made it hard for Wall Street to get excited about shares of top lenders.
That may have changed this week with promising news about Pfizer’s vaccine, which created a surge in investor confidence. The KBW Bank Index, which tracks the biggest US players, has gained more than 9%. It’s on track for its best week since June.
“We advise getting aggressive on banks,” Wells Fargo analyst Christopher Harvey told clients Wednesday.
The thinking: A low interest rate environment eats into the money banks make on lending activity. But Harvey predicts that a viable vaccine will unleash a flood of consumer spending, contributing to inflation. That would push central banks to raise interest rates before long.
“This pent-up demand, confidence and ability to spend should not be discounted,” Harvey said. Right now, he noted, investing in banks in a contrarian move. In his view, that could pay off.
DraftKings reports earnings before US markets open. The Producer Price Index, a key measure of US inflation, arrives at 8:30 a.m. ET.
Coming next week: Investor attention will continue to focus on the prospect of a safe and effective Covid-19 vaccine by the end of the year. Moderna has said it will make an announcement on the efficacy of its vaccine candidate by the end of the month.