Why the new normal will look a lot like the old one

Getting back to in-person work days is a question of when, not if, according to two portfolio managers

Why the new normal will look a lot like the old one

Get used to the “new normal” is what we’re being told. Work life will never be the same again, apparently. Welcome to schedules filled with more remote working, endless Zoom calls and virtual drinks.

There is no doubt that the COVID-19 outbreak has forced a drastic change in human behaviour and no one knows for sure what the lasting impact will be in terms of how we live our lives. However, Franklin Equity Group, part of Franklin Templeton, portfolio managers John Remmert and Donald Huber believe that many of the technological trends that have emerged or accelerated to help people cope in the current moment may not last much beyond the outbreak.

They insisted that, as social animals, human nature will reassert itself and ultimately limit the impact recent tech changes will have on our daily lives over the longer term.

Remmert said: “For one, we believe the technology that has allowed those who can work remotely to do so through video conferencing will never be a great substitute for face-to-face contact. In our view, video conference calls and remote working are unlikely to replace the office, conferences, networking events or the business meeting over the long run.”

They do believe, though, that other technology trends may prove more durable, like cloud-based computing and digitization but said that, while workers may have greater flexibility in their working arrangements, much of how people work and interact will look like it did before the outbreak.

Remmert said: “We do not see the home office replacing the corporate office and believe people will quickly return to working in-person once it is safe to do so again. That said, in the health care space, we would not be surprised to see telemedicine persist for minor health issues that a doctor can resolve without a patient making a trip to the office.”

In a post, the two PMs said the crisis had exposed the limitations of online education for elementary and high schools in particular. But they believe society's desire for communal sporting events will return, air travel and global business meetings will eventually take off again, and the lure of sunny vacations will bounce back.

This long-term view is echoed in their investment outlook, stressing that equities are a long-duration asset with opportunities, even in some of those areas of the market facing significant economic pain and uncertainty.

“We believe finding and understanding these opportunities requires a rigorous bottom-up investment approach that focuses on the sustainability of the company’s business model and its growth potential over the longer term,” Remmert said.

“Additionally, it is important to focus on finding quality companies with strong competitive advantages, robust balance sheets and healthy free cash flows that can weather a severe economic downturn and increased market and economic volatility over the near term. Moreover, we believe financially strong companies can not only cope with the downturn, but also have the potential to gain market share from weaker peers. Many of these high-quality companies should be able to emerge from the downturn even stronger.

“Although we expect heightened volatility and uncertainty over the near term as the coronavirus outbreak continues to unfold, we expect many long-term growth trends temporarily put on hold to resume once the crisis passes, and for some new technological trends to recede. Getting back to normal, in our view, is a question of when, not if.”