OPINION: Everyone wants a quick V-shaped economic recovery from the global pandemic. That's not going to happen. The likeliest winners of our gradual recovery will be patient, long-term investors willing to ride the waves.
Equity markets are factoring in a V-shaped economic recovery, with S&P 500 SPX, -0.01% earnings expected to recover in 2021 to a slight increase over 2019. Better-than-expected May and June jobs reports — and record May retail sales growth — provided a boost to more cyclical and value-oriented areas.
First-quarter earnings are now meaningless. Enterprise budgets are due to be cut across the board as companies reassess revenue assumptions in a very uncertain environment. The COVID-19 impact is also obvious in the growth of over-the-top content consumption. Disney+ DIS, -0.32% has benefited from more time spent at home and a search for entertainment to fill the gap left from live sports. This has come partly at the expense of traditional cable companies, where cable cord-cutting has accelerated.
Retailers such as Ulta Beauty ULTA, +1.34%, the cosmetics and skin care retailer, with its omnichannel capabilities and strong balance sheet, are positioned to take share from less-well-positioned retailers as the economy starts reopening. Home Depot HD, -0.39% has been investing in online capabilities for several years and is reaping the benefits: online revenue growth spiked to 79% in this year’s first quarter, up from 21% in the second half of 2019.
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