Patrick Nielsen, deputy general manager at MAPFRE AM, and César Gimeno, Asset Allocation & Global Equity & ESG Portfolio Manager at MAPFRE AM.

In a society that begins to take its first steps toward a long-awaited return to normalcy, many reflections take us to the impact of this health crisis. Emotions, a sign of our human condition, have run high. Incomprehensibility and a sense of injustice prevail. We have become well aware that we depend on a great chain for many of our needs, some of which are paramount, such as food. We have observed that this chain has its costs and its obligations. However, once this health crisis has been partially overcome, structural solutions must be sought to avoid the devastating effect on the economy, resulting in a kind of catharsis, understood as a purifying experience of human emotions. The economy is a reflection of human activity.

What lessons do the cold logic of financial markets hold for us? Some companies have not only weathered the crisis (to date), but are even trading above their pre-crisis levels. Netflix, Amazon, TeamViewer, Zoom, ASML, Microsoft, Gilead, Moderna and Walmart are part of this privileged group. Some, in fact, are directly related to treating the disease and others have products that have experienced a strong demand due to COVID-19. But they all share several attributes: they have a strong projection in the digital world; they are leaders in digital transformation; they are quality companies; they gain market share in their different markets; they have products with good margins or they have a sound financial structure; and they have shown incredible adaptability.

But does this mean that the path forward is clear and that we already know the winners of the next few years? Nothing could be further from the truth. Just as the first steps of ending the lockdown are conditioned by the evolution of data and the clear threat of a second wave of infections, the economy follows a pattern of creation/destruction illustrated by Schumpeter’s theories. Capital flees from activities with the lowest returns and flows toward the most profitable projects.

This is the case with Amazon, which has been identified as a clear winner in this new environment. Its most well-known facet of online commerce has been widely used by the population throughout these days of uncertainty. All their businesses are aligned with a digital world, particularly their server services that provide an online platform for many businesses. It is also the leader of Artificial Intelligence, which is the battle of the future. But soon they are likely to have competition. For example, in mid-May, Facebook unveiled its ambitions in e-commerce. In addition, many mass consumption producers have realized the importance of having a direct digital distribution channel, so Facebook will not be the only one jumping on this bandwagon.

This does not mean that Amazon is a categorically good or bad investment. It means that if we look the ever-changing world in which we live today, it is necessary to have a perspective beyond the uncertainty created by events such as the coronavirus, both in positive and negative terms.

This requires an analysis that goes far beyond Growth vs. Value: not everything that grows is a good investment, and no matter how cheap something may be, a solid fundamental analysis remains paramount. However, unlike in the past, this is not enough. There is a growing need for a thorough understanding of the dynamics of society and the interpretations of this dynamic by financial markets.

The figure of the investment manager as a mere analyst has become outdated. More necessary than ever is the profile of a comprehensive professional, who not only knows about economic and financial analysis, but also has a deep knowledge of the dynamics of society and has the ability to know how to deal with increasingly abundant information.

Investment management is also in the process of change, and this catharsis is going to affect society as a whole.