The post-pandemic normal looks a lot like…the pre-pandemic normal.
**The Postpandemic Normal Is Here and It Isn’t That Special**
**Plunging shares of pandemic beneficiaries such as Amazon, Netflix, and PayPal suggest a more sober view of economy’s transformation**
**By Greg Ip, The Wall Street Journal, May 4, 2022**
**There is more behind the stock market’s downdraft than higher inflation and interest rates. It is also a sign the economy has arrived at a new postpandemic normal — and it isn’t as lucrative as investors had hoped....**
**There are parallels with the dot-com bubble that burst in 2000. In both episodes, technology did fundamentally alter our way of life, but the market, aided by the Federal Reserve’s easy money, drove stock prices to levels that assumed these trends would continue indefinitely. They didn’t....** [end quote]
Companies that serviced pandemic-era needs – video conferencing, online shopping, home food delivery, streaming video, telehealth – knew Covid-19 was pulling forward future growth, and that the boost would eventually dissipate. Yet they kept hiring and investing. Many of these companies have lost their Covid surge of customers. Stock prices of Netflix, Teladoc, Peleton, Zoom and others have dropped dramatically.
This reminds me of the huge investments in internet infrastructure before 2000. Shareholders and bond holders lost massively during the 2001 stock market bubble burst even though the infrastructure was used later.
Productivity growth was positive from 1990 to 2008. Although volatile, the chart shows falling productivity after 2020. Productivity has a direct impact on profitability. As the economy moves into the post-pandemic era, productivity will show whether the investments during the pandemic had a positive long-term impact.
With the Fed raising interest rates and inflation high, lower productivity will hurt the profitability and share prices of many companies.