It is not difficult to get depressed when we see how the pandemic has struck down so many and disrupted the lives of many more around the globe. But let’s start on a brighter note, namely the approval in several countries of the first fully-tested vaccines which in theory should bring the nightmare of the pandemic to a close in the foreseeable future. The US and the UK are now well underway with plans to vaccinate essential medical workers and the most vulnerable in their populations. Hopefully Indonesia, including Bali, will soon follow.
It won’t be a simple operation; the logistics are considerable, particularly for a country like Indonesia with its many islands and remote areas. It would be a challenge to distribute any commodity to all corners of the island, but this one has the added challenges of having to be maintained at constant cold temperatures. Maybe this will eliminate the Pfizer vaccine locally as it has to be kept at minus 80 degrees centigrade, but there will be several alternatives. Bali should certainly be high on the list for early deliveries as its tourist industry is so important to the economy.
As challenging as it may be, it is definitely going to happen, so there is real light at the end of the tunnel and I suspect the pent-up demand of people who have been locked down or restricted for so long will result in a flood of visitors to Bali.
Who have been the big losers during the pandemic?
If you live in Bali that is not a difficult question to answer. Anyone in the hospitality industry will have experienced the biggest disruption in their lifetimes. Where hotels, transportation, tourist activities etc. are concerned the impact of the pandemic has been worse than that of the bombings or volcanic eruptions. And while those events caused big losses for the industry in Bali at the time, the pandemic has had a similar impact around the globe. The cost to countries’ economies has been massive and is ongoing.
It is not only the tourist industry that has been hit. Millions of businesses, small and large, have been forced to close as people have been confined to their homes. Sales of non-essential consumer goods have plummeted.
But there have been some winners
With consumers confined to their homes or afraid to go out, delivery services have provided a vital lifeline. On the smaller scale, restaurants that could deliver to households have flourished. Globally, online stores such as Amazon or locally, Tokopedia, have snapped up the business lost by high street stores and shopping malls. Where the retail industry is concerned this does not augur well, as many people will have got accustomed to the convenience and lower cost of online shopping.
When new players like Zoom and Microsoft Teams quickly came on the scene many people realised that a lot of money could be saved by using them instead of attending meetings. Even large conferences are now being held virtually. While they may not be as effective as face-to-face events, many companies are going to look seriously in future at the big savings of ‘going virtual’. Business leaders, hotels etc. are going to have to look hard at the benefits and savings as well as the downside impact of the changes. The ‘new normal’ after the pandemic could be quite different from life as we knew it.
How did your savings and investments perform this year?
This will depend on where and how you saved your money. Many of course will have seen their savings depleted if their jobs or businesses were seriously affected by the pandemic. If a good portion of those savings were in cash then at least it showed the wisdom of keeping healthy cash reserves, something I have always advocated. Cash in the bank is a very poor investment but is still an essential part of a sound financial plan to ensure that contingencies and emergencies can be met without having to sell the family jewels or encash investments that have been painstakingly accumulated over years and which are probably earmarked to ensure a comfortable retirement.
Winners and losers in the financial markets
If you were able to hold on to investments in savings plans, pensions and portfolios, their performance this year would depend heavily on which sectors they were invested in. Here is a sample of which assets would have proved successful and their estimated gains up to recently, despite a big crash in the markets when the coronavirus became a reality in March:
- The IT sector – up 32%
- Communications Services – up 17%
- Healthcare – up 10%
- Gold – up 23%
- US Treasuries – up 7%
- Corporate bonds – up 6%
Meanwhile, the biggest losers have been:
- Airlines – down 34%
- Oil and gas sector – down 33%
- Financial sector – down 11%
- Real Estate sector – down 8%
These figures are very general and will fluctuate considerably between individual holdings but they do reflect the general picture.
The ‘losers’ however have shown signs of life since the positive news on vaccines so some of them could regain much of their losses in the coming months. The recovery of the oil industry may be limited however as political pressure builds to move away from fossil fuels to more sustainable forms of energy. The IT sector and healthcare are likely to continue to flourish while low interest rates will impede bonds, particularly government bonds. Gold is likely to rise only in times of crisis, as it has done this year. Cash of course is neutral, essential for short term planning but a poor long-term investment. Choice of currency is a different issue.
To sum up…..
For most people 2020 has been a disruptive and miserable year, although for many investors the year has offered some compensation. What lies ahead depends very much on the success of a global vaccination campaign and the elimination of the pandemic, hopefully for another 100 years. The outlook is much more positive now than even a month ago.
In the meantime have a good, albeit quiet and safe holiday season and may 2021 bring you much better tidings!
Colin Bloodworth, Chartered Member of the Chartered Institute for Securities and Investment (UK), has spent over 20 years in Indonesia. He is based in Jakarta but visits Bali regularly in normal times! If you have any questions on this article or related topics or would like to receive a free monthly newsletter on financial matters you can contact him at colin.bloodworth@ppi-advisory.com