Post-Virus, It’s Back to the Way Things Were, Right? Not Quite

Investing will be somewhat different in the world after the pandemic, Capital Group says.


The climbing stock market assumes that the economy will flash us back to 2019, once the new vaccines rout the pandemic. There’s good reason to expect such a recovery outcome, but things will be different in 2021 than they were in the before time.

That was the message from a panel of Capital Group experts Wednesday, discussing what the new year might bring. With news that the first doses of vaccine should be available in the US this month, provided that regulators approve them, hope abounds that the economy will come roaring back.

So Capital Group believes that US gross domestic product (GDP) will expand 3.1% next year, as opposed to 2020’s expected 4.3% shrinkage. While 3.1% is no blowout, it’s better than 2019’s so-so 2.3% increase, a figure that was in keeping with the nation’s tepid growth since the 2008-09 financial crisis.

“We could reach herd immunity by mid-2021,” said Jared Franz, an economist with the investment management company (assets: $2.1 trillion). Then, “the U-shaped recovery would become V-shaped,” as growth accelerates. At the moment, though, he noted that some segments of the economy “are not doing well”: lower-income people, small businesses and commercial real estate, for example.

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Certainly, Franz went on, the COVID-19 outbreak has helped some sectors, such as home improvement and consumer staples, and furthered those in good condition beforehand, such as tech and health care. The disease has harmed sectors that were growing and got tripped up: think travel and restaurants. Once the pandemic threat is gone, they should benefit from pent-up demand, he said. A tougher road lies ahead for those he called “ripe for disruption”: energy and retail, for instance.

But recovery won’t necessarily be even, the Capital Group panelists indicated. True, said equity portfolio manager Jody Jonsson, amid the pandemic downturn, companies cut costs and became quite efficient. “But everything won’t snap back to the way it was before,” she warned. For example, she wondered whether home exercisers will quickly abandon their Pelotons once they can go back to the gym. 

The return of some travel industry stocks to their previous levels puzzled her. Jonsson pointed to cruise lines, which she said would be compelled to spend more to satisfy passengers that a ship was safe. And the cruise companies “won’t be able to pack as many people” aboard as before, she added. Possible result: crimped revenue.

On the other hand, “COVID has accelerated trends that already were in place,” to the benefit of certain sectors, she said. Hence, Jonsson’s firm sees growth in telemedicine ($46 billion in 2019 revenue, jumping to an expected $176 billion in 2026) and wearable medical devices that monitor vital signs ($628 million, rising to $2.4 billion).

One aspect of economic life that shouldn’t change soon, vaccine deliverance or no, is low interest rates. That’s a disappointment for people and investment funds that once enjoyed fat interest payments. John Queen, a Capital Group fixed-income portfolio manager, said people “will have to accept lower income” from bonds, given the Federal Reserve’s penchant for keeping short-term interest rates near zero for several years.

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Nasdaq Proposes Board Diversity Requirements

Market operator files SEC proposal to require company boards to meet certain guidelines to be listed on the exchange.


Nasdaq has filed a proposal with the US Securities and Exchange Commission (SEC) to adopt new listing rules that would require all companies listed on the market operator’s US exchanges to publicly disclose consistent, transparent diversity statistics regarding their board of directors.

“Nasdaq’s purpose is to champion inclusive growth and prosperity to power stronger economies,” Adena Friedman, president and CEO of Nasdaq, said in a statement. “We believe this listing rule is one step in a broader journey to achieve inclusive representation across corporate America.”​

According to the proposal filed with the SEC, Nasdaq-listed companies would be required to have at least one director who identifies as female, and at least one director who identifies as Black or African American, Hispanic or Latinx, Asian, Native American or Alaskan Native, Native Hawaiian or Pacific Islander, two or more races or ethnicities, or as LGBTQ+. If a company doesn’t comply with the requirement, it needs to explain why. Nasdaq also noted that “female” refers to anyone who identifies as a woman regardless of the gender they were designated at birth.

“Over the past year, the social justice movement has brought heightened attention to the commitment of public companies to diversity and inclusion,” Nasdaq said in its proposal. “The benefits to stakeholders of increased diversity are becoming more apparent and include an increased variety of fresh perspectives, improved decisionmaking and oversight, and strengthened internal controls.”

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Nasdaq conducted a study of board diversity among Nasdaq-listed companies based on public disclosures and found that the national market system and the public interest “would best be served by an additional regulatory impetus for companies to embrace meaningful and multi-dimensional diversification of their boards.” It also found that current board diversity data reporting was not provided in a consistent manner or on a sufficiently widespread basis, and, therefore, investors are unable to compare companies’ board diversity statistics.

Nasdaq also said it reviewed dozens of empirical studies and found that an extensive body of academic research demonstrates that diverse boards are “positively associated with improved corporate governance and financial performance.”

It added that studies have found that companies with gender-diverse boards or audit committees are associated with more transparent public disclosures and less information asymmetry; better management reporting discipline; a lower likelihood of manipulated earnings; an increased likelihood of voluntarily disclosing forward-looking information; a lower likelihood of receiving audit qualifications due to errors, non-compliance, or omission of information; and a lower likelihood of securities fraud.

Additionally, Nasdaq cited studies that found that having at least one woman on a company’s board is associated with a lower likelihood of material weaknesses in internal control over financial reporting and a lower likelihood of material financial restatements.

“Studies also identified positive relationships between board diversity and commonly used financial metrics, including higher returns on invested capital, returns on equity, earnings per share, earnings before interest and taxation margin, asset valuation multiples and credit ratings,” Nasdaq said.

The company also said it is partnering with Equilar, a provider of corporate leadership data solutions, to help Nasdaq-listed companies with board composition planning. It said the partnership will allow companies that have not met the proposed diversity requirements to access a larger community of highly qualified, diverse, board-ready candidates when searching for directors.

“While gender diversity has improved among US company boards in recent years, the pace of change has been gradual, and the US still lags behind,” Nasdaq said. “Moreover, progress toward bringing underrepresented racial and ethnic groups into the boardroom has been even slower.”

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