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The Great Reset: Dramatic Shifts in the Way We Live Are Reshaping the Markets

August 28, 2020
How changes in consumer behavior have lifted some sectors—and depressed others

View of the tulip fields from the air

IN A FEW SHORT MONTHS, THE CORONAVIRUS has made working from home so familiar that “many employees are wondering if they’ll ever work from work again,” says Lauren J. Sanfilippo, Vice President and Market Strategy Analyst for the Chief Investment Office (CIO), Merrill and Bank of America Private Bank.

The shift to working from home is just one of many dramatic changes in consumer behavior highlighted in a new report from the CIO: “The Great Reset: Work, Play and Live in a Post-Coronavirus World.” The paper, co-authored by Sanfilippo, anticipates an economic recovery in late 2020 and into 2021, driven in part by a wave of home-buying by a more digital workforce. 

“Changes in the way we live, work and play will affect different sectors in varying ways, with some coming out ahead and others potentially losing ground,” notes Sanfilippo. Here’s a quick look at how those changes could impact your investment decisions.

“Changes in the way we live, work and play will affect different sectors in varying ways, with some coming out ahead and others potentially losing ground.”

Lauren J. Sanfilippo, Vice President and Market Strategy Analyst for the Chief Investment Office, Merrill and Bank of America Private Bank

Rethinking how we work

Nearly a third (31%) of workers employed in early March went remote by early April, according to the National Bureau of Economic Research1, and an IBM study2 found that 75% of adults would prefer to continue to work remotely at least some of the time after the pandemic retreats. Moving forward, as the unemployment situation slowly begins to improve, remote jobs are likely to be higher skilled, higher paid positions, Sanfilippo says. “This in turn should support a stronger future consumer.”

While workers in vulnerable industries such as travel, leisure, and brick and mortar retailers will likely need retraining, “areas such as manufacturing, housing, technology and health care are leading the early stages of an employment recovery,” says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank.

In the new remote workplace, businesses in areas ranging from teleconferencing, communications services and cybersecurity to tech hardware and casual clothing should benefit. Transportation companies and small businesses that support commuters or that produce business clothing are likely to struggle, Sanfilippo adds.

“Areas such as manufacturing, housing, technology and health care are leading the early stages of an employment recovery.”

Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank

Reimagining how we live and play

Fueled by low interest rates and a focus on social distancing, home-buying among a key demographic group, 35 to 44 year olds, is expected to return to growth for the first time in 14 years.3 BofA Global Research estimates that the housing industry should reach pre-coronavirus levels by late 2021.

In terms of entertainment, streamed on-demand programming should continue to benefit, while theme parks and theaters struggle. Meanwhile, auto sales, including electric vehicles, should get a boost as “cooped-up” Americans seek travel options that offer a degree of separation.

What it all may mean for your investments

Despite the challenges, “what remains clear is that consumers are on the path to rebuilding and should prove their resiliency along the way,” Hyzy says. “We currently favor stocks over bonds overall,” he adds, with a preference for large U.S. companies and disruptive innovation companies. Yet bonds remain an important way to balance a portfolio, he adds, and the uneven nature of the recovery places added emphasis on a diversified portfolio.

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