Breaking Down The Pandemic's Lingering Impact On Market Sectors

There’s no question the COVID-19 pandemic has had a significant and potentially lasting impact on the economy. Nadex recently compiled a report focusing on the U.S. economic recovery up to this point on a sector-by-sector basis.

The tech sector has been one of the few market sectors that has navigated the pandemic relatively well. Technology allowed many businesses to take a creative approach to reaching customers during the shutdowns. As a result, secular shifts toward technologies facilitating remote work, online shopping, direct-to-consumer entertainment and even food delivery got a big boost in 2020.

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Thriving Tech Sector: Certain tech stocks have performed extremely well throughout the pandemic, but finance expert Dan Nathan recently warned investors about bloated tech stock valuations among companies focused on cloud-based software, streaming media, digital ads and electric cars.

“The valuations make little sense in historical terms, and we know how periods of mass euphoria end: with economic recessions, protracted bear markets, and risk-asset bubbles overshooting to the downside just as they did to the upside,” Nathan said.

The agriculture industry was also unevenly impacted by the pandemic. Restaurant demand plummeted, and food retailers that supply hotels and food service outlets struggled.

Growing demand from China and reduced supply from competing countries sent corn prices to the highest levels in six years by the end of 2020.

In the energy sector, total energy delivery to residential, commercial, transportation and industrial end markets dropped 90% in 2020. The U.S. Energy Information Administration says it could be anywhere between 2024 and 2050 before this energy demand recovers to pre-pandemic levels depending on the pace of economic recovery and growth in coming years.

Real Estate And Travel: A sharp drop in interest rates in 2020 created a boom in the housing market just as commercial real estate was taking a huge hit.

Yet the recent stress test of U.S. banks demonstrated that mortgage lenders are being much more responsible during the current boom than they were during the housing crisis leading up to the 2008 Great Recession.

The travel industry was one of the hardest hit segments of the market. Many airlines, cruise stocks, and casino and hotel stocks have yet to recover to their pre-crisis highs even in a red-hot stock market. Domestic and international travel spending dropped from $1.1 trillion in 2019 to just $680 billion in 2020.

Benzinga’s Take: Looking ahead, Nadex identified several areas of the economy that still have a long way to go before they fully recover from the crisis. However, recent trends in employment, GDP and corporate earnings suggest the pandemic was far from a worst-case scenario for the economy and will hopefully not have the severe, long-lasting economic impact of previous crises, such as the Great Depression.