The Best Years Of Our Lives

By Christopher R. English, President of Lumen Capital Management, LLC

I am always on the lookout for major investable trends. For example, I have often written about how technology and healthcare are significant beneficiaries of the exponential growth rate of knowledge. The post-COVID-19 world is emerging as an entirely new frontier where we can and should research investments that are adapting well to our new reality. There’s no doubt that the virus has fueled rapid change. Experts claim that in certain industries, five years of innovation have occurred within one. In addition, the pandemic has also accelerated trends that were already in place. Since markets anticipate the future, it’s important for us to start wrapping our minds around this now, even though the virus is still active. Here’s why.

The Impact Of Vaccinations

We are slowly turning the tide in our battle with COVID-19. Whatever the current vaccination rate, it will never be lower than it is as of now. Immunization rates can only improve going forward. About a million of us are now getting vaccinated each day. By late spring, we'll probably see about 100 million people vaccinated, with a sizable percentage of those folks having two jabs in the arms. Next, add in all the people who’ve recovered from the virus, both reported and unknown, and it’s estimated nearly 55% of Americans may already have had COVID-19. (1) Taking vaccinations and viral exposure into account, it is possible that herd immunity may be closer to reality than many think.  

Simply put, the virus is running out of hosts to infect. Yes, there have been mutations, but the virus is now on the run, not us. So far, the vaccines seem to work against these new variants, and our wonderful pharmaceutical companies are working on researching solutions to these changes. You may need to turn around in a few months and get a booster shot as protection against newer variants, and we’ll soon know if you’ll need to get a COVID-19 vaccine every fall for the foreseeable future, just like the flu shot. As we get the upper hand over COVID-19, it’s time to peer into the future and see what may come. To do so, we’ll first take a peek at the past—via the movies.  

A Changed World

There are many great motion pictures about the Second World War. Interestingly, one of the best ones didn’t involve much in the way of heroic battles. In 1946, just as the country was readjusting to peacetime, Hollywood gave us "The Best Years of Our Lives". The film follows the story arc of three veterans returning home after the war and follows their difficult adjustment to civilian life after so many years of military discipline and the stress of combat.  

The movie was a box-office success and struck a chord across the nation. Americans increasingly understood they had withstood a great event and the country wasn’t the same as when it had sent young people off to battle in 1941. Perhaps not everybody saw this in the beginning, but the soldiers did. They came home to a country that many could barely recognize, one that had undergone profound changes since they shipped out. The soldiers were the first to understand, just as in that movie, that great events change things. Nothing would be exactly as it was when they left. On the surface, things might look the same, but returning GIs had done too much and witnessed too many things to see the world in the same manner as they did prior to Pearl Harbor. You could come back to the place you were from, but you could never come “home” again. That place didn’t exist anymore.

I think about that movie when seeing how much things have changed as we reach the anniversary of the last time life felt normal. Back then, we were staring at a dark crisis rushing at us too quickly to make thoughtful decisions. Now, we are a year in and in an entirely different place. As we emerge from this catastrophe, we’re unlikely to find anything like “normal” (if that means returning the world to exactly as it was). As with the World War II generation, we’ve all seen and experienced too much for that to happen. Yet, as we pick up the pieces and try to find our way back, here’s what I think is going to happen.  

Our New Normal

After all we’ve endured, I think we all have a deeper appreciation for life itself, which brings greater joy. The vaccines are going to allow us, in some way, shape, or form, to resume the activities that make life worth living. Family gatherings and parties will start up again, probably relatively soon. I also believe there will be an economic advance the likes of which we haven’t experienced in decades. There's now over a year of pent-up demand for many things. A primary spend will be for entertainment, trips, and all the accouterments that come with that. All the things that have been denied to us for so long will start to come back and people are going to embrace this great reopening with the same exuberance as sailors coming into port after a long stint at sea.  

Without minimizing all the pain that’s occurred, experience tells me that folks are in a mood to live and celebrate again. Besides, many of those economically impacted by the lockdowns are those in service and entertainment businesses. These are the people most likely to be the beneficiaries of this great reopening as it occurs. I also think the spending surge will come before all of the new stimulus money the Biden administration pushes into the economy. The multiplier effect of all that money coming out of hibernation is going to be stunning. You're already witnessing this in places that have relaxed COVID-19 restrictions. Therefore, I think economic numbers for the next few quarters are probably low. Earnings estimates for the market may not reflect what I think is coming and that could be supportive of stocks in the coming months as well.  

I think we’ll also have a national reckoning of what’s been taken from us by the pandemic. Other than the death and economic costs, we’ve also had much stolen personally. Graduations didn’t happen and seniors in high schools and colleges never got that final goodbye tour. Many grandparents have not seen their grandchildren in over a year or met the new ones welcomed into the world, except through Zoom. Brides didn’t get to have the wedding they’d always dreamed about, or if they did, it was a slimmed-down affair. There were no or few retirement or birthday parties to celebrate major milestones. Residents of nursing homes have been virtual prisoners in their rooms for much of this time and, for the most part, shut off from their families. Perhaps the saddest are the stories of COVID-19 patients who died alone, with no family by their side and no chance for the family to say goodbye with a traditional funeral. We will be dealing with these consequences and these changes for years to come.

Looking To The Future With Hope

As it becomes clearer and clearer that the worst of the virus is behind us, I believe we’ll emerge knowing we’ve endured a generational great event. The world will never look exactly like it did before the lockdowns last spring. What will pass for normalcy going forward is unclear. However, my guess is that, as a country, we’re going to feel like we’ve weathered the passing of a massive storm, and if we can face down the virus, we can tackle other significant issues as well. That confidence will then trickle into the economy. I think we’re going to be surprised at the rapid pace of economic recovery and growth over the next few years.  

I think the blueprint for what we’re about to experience will be similar to what our economy went through after World War II ended. On that note, I want to end with a final reference to that time. That war ended in September 1945, when Japanese dignitaries signed surrender documents aboard the USS Missouri. Those watching on the deck of the Missouri knew they were witnessing history. They may not have been able to figure out how things were going to change, but it was pretty obvious that the world was a different place. The men and women of that time will also tell you how the war’s end lifted an immense burden from them. They could imagine life with hope again and they now had the opportunity to grow old. Well, we experienced our own “generational event” when a nurse from New York sat in a chair and received the first dose of the coronavirus vaccine. As in 1945, we’re confronting a changed world and doing so at a time when many of the burdens imposed on us by the virus are lessening.

If the past is prologue, then people will be in the mood to live again. The economy did pretty well in the years after that war. All that pent-up demand was just waiting to be spent. Similarly, I think we’ll be surprised at the economic growth we’re going to experience in the years ahead. I have optimism for the long term based on past experience and what I’m already seeing. It will be my job for you to find those new trends and try to develop winning investment themes from this as the years pass. If you want some guidance along the way, please reach out to me at 312.953.8825 or by email at lumencapital@hotmail.com.

About Chris

Christopher R. English is the President and founder of Lumen Capital Management, LLC-a Registered Investment Advisor regulated by the State of Illinois. A copy of our ADV Part II is available upon request. We manage portfolios for investors, developing customized portfolios that reflect a client’s unique risk/reward parameters. We also manage a private partnership currently closed to outside investors. Mr. English has over three decades of experience working with individuals, families, businesses, and foundations. Based in the greater Chicago area, he serves clients throughout Illinois, as well as Florida, Massachusetts, California, Indiana, and other states. To schedule a complimentary portfolio review, contact Chris today by calling 312.953.8825 or emailing him at lumencapital@hotmail.com.

____________

(1)  https://www.wsj.com/articles/well-have-herd-immunity-by-april-11613669731