The New New Normal
A paradox emerged in the global economy following World War II. Germany and Japan, despite losing the war, became among the world’s most productive and dynamic economies, while the U.K., which won, suffered decades of tepid growth.
Economists explain this divergence by pointing to the disruption the war caused. Germany and Japan were forced to reinvent their economies following the losses of the war. In the U.K., old economic structures remained, and the economy was slow to adapt with the times.
A somewhat similar dynamic is at work today as the world is reshaped by the pandemic. Everywhere one looks, the economy is changing. Old ways are being displaced by new technologies, and out of the pandemic a new, more vibrant 21st century economy is emerging. We call it the New New Normal — an economy where rapid technological innovation, accelerated by the pandemic, combines with robust consumer and business fundamentals to create opportunities for investors. This follows what economists termed the Old “New Normal” – the decade following the 2008 financial crisis when the aftereffects of the housing bubble restrained economic growth.
For Western Pennsylvanians, the narrative of crisis and rebirth is familiar. The collapse of the steel industry forty years ago, although painful, forced the region to recreate itself. Today, Pittsburgh is a leader in technology and healthcare, in addition to traditional industries. Contrast this with the fortunes of cities tied to the auto sector, which suffered a more gradual decline than steel. These cities were never compelled to reinvent themselves, and today many lag behind Pittsburgh in growth and dynamism.
Likewise, we believe that the pandemic, though painful and tragic, is forcing changes to the economy that could benefit investors. In this quarter’s report, we review recent market events and outline what to expect in the New New Normal.