At no time in recent memory has the consumer wallet been more up for grabs. Here, we provide our multi-sector view on stocks poised to outperform, based on the speed of recovery. This report focuses on several industries including airlines, airfreight, apparent & footwear, beverages, grocery, internet, online travel & hotels, media, payments, restaurants and retail.
THE COWEN INSIGHT
Key themes highlighted in the report include
- Our expectation of a prolonged consumer recovery
- Cautionary proprietary consumer survey data points
- Cowen Washington Research Group estimates on the timing, magnitude and breakdown of the fifth stimulus bill
- Breakdown of sector growth expectations
- Time to recovery
- Winners and losers
- Scenario positioning
Factors Affecting Consumer Economic Recovery from COVID-19
Consumer spending, 70% of GDP, will define the shape of the recovery. Our consumer framework points to a prolonged consumer recovery. Cowen’s proprietary bi-weekly consumer survey suggests that consumers’ time frame of expected disruption has extended, and the level of comfort in returning to “normal” activities has deteriorated.
However, a fifth stimulus bill is waiting in the wings. It could unleash an incremental $2 trillion in economic support.
The reopening, on so many levels, is highly unpredictable, so we share our perspective on stock positioning should it be faster or slower than expected.
COVID-19’s Impact on Technology Adoption
What is certain is that the pandemic has pulled forward digital adoption curves. With many digital technologies doing better on a “clean slate” basis, behaviors are likely to be carried forward.
Herein, the Cowen Consumer Research Team shares its perspective on how each sector is likely to develop. We zero in on the key themes, share gainers and donors, and how to position for the future.
Prices Already Reflect A Quick Recovery
Our Cowen 50 Retail Index FY1 P/E multiple has expanded from 14x to 23x as sentiment is clearly positioned for Fall/Holiday sales and margin recovery. We do not view the retail sector as being priced for any meaningful COVID-19 lockdown disruption.
As we look at Consumer Confidence – seven previous recessionary declines (similar to the year over year declines in the Conference Board’s index registered in April and May) have generally coincided with some of the best three and five year rolling returns for the S&P 500 since 1975 as “animal spirits” and confidence reset themselves for a new cycle.
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