Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Cancel Anytime
Enjoy Unlimited Digital Access
Get full access to
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

What the world looks like when the crisis ends is truly anyone’s guess, but I will say with 100-per-cent clarity that it is going to look a lot different than it did before. Months of isolation and distancing and fear of a return of the pandemic are going to fundamentally alter lifestyles and will have a profound influence not just on the way we live but how we conduct ourselves in our business and commercial lives.

Working from home is certainly going to be a more dominant force, with obvious negative implications for commercial real estate, but positive implications for internet infrastructure, computer hardware and video conferencing. There is going to be a sharp reduction in travel to work, indeed travel in general, and this means fewer cars on the road. All the reasons to avoid the energy sector will now be accentuated, and there’s nothing good here for the auto sector or office real estate investment trusts.

Delivery services, on the other hand, have now become an essential, so here is a budding bull market right there for and any business model that copies it. I should tack on grocery chains with online services coming out of this as a winner. I sense that spending on robotics, which was already very strong, is now going to go parabolic. It goes without saying that biotech and pharma will be sectors you want exposure to for a long time. The one thing that came out of this is the realization that the U.S. health care system is way too overregulated, so political risk will largely disappear from this group.

Story continues below advertisement

But from a really big picture standpoint, we also come out of this with a world that is going to be smaller; a world that is more nationalistic, much more protectionist than before. So globalization and just-in-time inventories stall here because we have seen, in real time, the importance of having stockpiles on hand. With reduced global supply chains, get ready for higher inventory financing for every unit of production.

This tells me that the global corporate cost curve goes up in a secular fashion, at a time when we will still be operating with an output gap for an extended duration, which in turn means more compressed profit margins, and all at a time when share buybacks will be slowed in favour of retention of cash on business balance sheets. It has to be understood that the share buyback craze, funded by the most profound debt-for-equity swap of all time, alone added 1,000 rally points to the S&P 500 this past cycle. This was the most pronounced source of demand for equities in the bull market, and now it is going to play a more minor role.

We also have to add to this mix the fact that even if half of the bear market gets reversed, the household sector in the United States just got hit with a huge negative wealth shock, and this happens with the median age of the dominant baby boomer at 65 years, not 53 as was the case in the great financial crisis, or 45 during the tech wreck. In the United States alone, we are talking about more than 70 million boomers who are going to be forced to reassess their calculations of what their retirement lifestyle is going to look like, or if they can retire at all.

This speaks to the likelihood of a prolonged period of a rising personal savings rate, which, by the way, recalibrates to a much lower GDP growth rate in the future. If the past decade was the weakest economic cycle on record at 2-per-cent growth a year, then 1 per cent in the future may be the new norm, which in turn means stagnant in real per capita terms. That, as a result, sets us up for a new and lower estimate of the fair value price-to-earnings multiple in the stock market, a much higher general level of risk premia and why I think we will be heading into an elongated period where, to be successful, you’ll have to pick securities or sectors instead of simply markets or major averages. So I sense the exchange-traded fund industry will have to undergo some adjustments as well.

As for interest rates, I want to point in your direction a report that the Federal Reserve Bank of San Francisco published last month on the past 15 great pandemics since the 15th century. It concluded that we go through years in which private savings trend up and investment trends down, and that leads to a semi-permanent decline in the natural rate of interest, on average by 150 basis points, which is a little unnerving since we started this cycle below 1 per cent to 1.5 per cent on the neutral rate. So we are destined now to be right at the floor for interest rates both of short- and long-term maturity for an extended period of time.

And even if inflation comes back, the Fed is going to cap yields, as is done in Japan. (The Federal Reserve Bank of New York just wrote a report, too, on how the Fed targeted long-term yields from 1942 to 1951.) I have to say, the prospect of ever-negative real yields tells me that the one exposure you do want in your personal accounts is gold, which, amazingly, is still 13 per cent below the all-time high it set on Sept. 6, 2011.

David Rosenberg is founder of independent research firm Rosenberg Research and Associates Inc.

Story continues below advertisement

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies