Right now the market’s focus isn’t Covid-19, but rather on how the collective population perceives Covid-19. The swiftness of our recovery depends on the psychology of global consumers. If fear is widespread for some time, the recovery will be slow. If fear dissipates quickly, the recovery will be fast. In our summer note, we use real-time alternative data to show how the psychology of consumers has changed for the better since April. Even as we’ve seen some big hotspots emerge recently, psychology has yet to take a material hit. This gives us more confidence in our barbell portfolio as the global consumer continues to power through. In other words, we are optimistic but allow for the risk of setbacks.
Of course, psychology can change quickly, which is why we continue to monitor the data, be patient, and pick our spots. One side of the barbell is our defensive assets, providing a great buffer being relatively unrelated to “normal activity.” This half concentrates on preservation, data, technology, and healthcare. However, as psychology continues to trend upwards and fuel the recovery, our cyclical side of the barbell kicks in. Our focus there is on housing, electricity, and industrial parts.