Invest
Are we entering the 21st century’s roaring 20s?
Not unlike the start of the 1920s, we are adjusting and changing to circumstances created through a global pandemic. COVID-19 remains a lingering threat to the traditional way society and economies function. In the absence of a vaccine and cure, has the pandemic irrevocably altered the way we work, rest and play?
Are we entering the 21st century’s roaring 20s?
Not unlike the start of the 1920s, we are adjusting and changing to circumstances created through a global pandemic. COVID-19 remains a lingering threat to the traditional way society and economies function. In the absence of a vaccine and cure, has the pandemic irrevocably altered the way we work, rest and play?
There is no denying we are witnessing rapid change and dislocation from the old to the new. It is manifesting itself across innovation and technology but also in populist politics/strongmen leaders and social inequity, particularly as unemployment sours post-coronavirus. Central banks have responded in kind by dropping interest rates to historic lows.
For share investors, the lower for longer interest rate environment provides the bedrock for ongoing development across a spectrum of industries, accelerating existing technological trends and allowing new innovation. Billionaire Jeff Bezos’ Amazon issued US$2 billion 40-year bonds with a 2.75 per cent coupon as part of a US$10 billion bond issuance. Jeff will be 96 years old by 2060 when these bonds mature.
What will make the 2020s roar?
- Acceleration of existing technological change – Only 10 months ago, a senior Sydney fund manager scoffed at the suggestion of using the software Zoom for online conferences/meetings. Since then, Zoom has become the go-to software platform for visual communication, meetings, musical performances and Pilates classes. It may even become a verb “to zoom”. The share price has doubled, and the company just reported first-quarter earnings that quashed analyst expectations. If a recent survey is anything to go by, 50 per cent of Australian women respondents said they will not return to gyms as we come out of the lockdowns. The reason? They are time-poor and will continue online classes.
- Old becomes new again – Almost perversely, the day that the US erupted in some of the worst racial riots since the time when man went to the moon, Elon Musk’s Space X in conjunction with NASA put two astronauts back into space. Not since the last space shuttle in 2011 has America flown astronauts to the Space Station. While the space race may divide opinion, there is no denying the significant scientific breakthroughs that have historically been achieved and will be forthcoming from the new private sector involvement, including Elon Musk’s Space X, Jeff Bezos’ Blue Origin and serial entrepreneur Richard Branson’s Virgin Galactic’s mission to offer the first space flights to the general public at a cool US$250,000 per flight.
- Digital disruption continues – The pandemic has more than reinforced, it has accelerated the growth in digital technologies and disruptive business models across retail, payment systems, SMEs and the work-at-home space. In the retail and payment sectors, sales data and anecdotal evidence would suggest the ongoing shift from bricks-and-mortar shopping to the online space, with record growth in sales volumes from Amazon and non-cash payment platforms like Paypal, Afterpay, Zip and EML payments.
- Cloud computing is the word – To support all the digital disruption and software-as-a-service (SaaS) businesses, cloud computing infrastructure and support has also accelerated. The results for the leaders like Microsoft’s Azure, Amazon Web Services (AWS) and, domestically, the uptake in the data centres of NEXT DC are proof of the accelerating trend. Chip maker Nvidia in the US has also benefited (as well as from ongoing development in AI, acceleration in online gaming and autonomous driverless vehicle development).
- AI – Data collection and the development of AI is benefitting existing companies like Appen in Australia and Splunk in the US. We may even have a new name if the privately owned Nuix comes to the sharemarket. Watch this space.
- Green revolution – The success of Elon Musk’s Tesla, the only transport and energy company in the world funding and developing greenfield factories at a time when traditional names like Renault are fighting to survive, is further proof that the way we are transported, and the energy sourced for that, is a trend showing no slowdown.
These are but a few examples of what’s happening. Australia sometimes tends to be a follower, not a leader, in the technological space, but maybe the pandemic and geopolitics will refocus policy to support more domestic innovation and companies like Atlassian, the SaaS giant. I can’t name all the great Aussie tech companies, but I think investors would be wise to keep an eye on the 2020s.
Of course, anything could happen to derail or dull the roar, but if human ingenuity has shown me anything, it is the drive to adapt, change and prosper, even in the tough times. The fact that there are more than 200 companies working on a COVID-19 vaccine is a case in point.
Danielle Ecuyer is an author and investor.
