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Key takeaways:
- Reactive fiscal and monetary policies helped to sustain the consumer throughout this difficult period. The continued recovery of the consumer will be determined by the evolution of the global public health emergency and further fiscal and monetary policies.
- Many consumer trends have been accelerated during the health crisis, with some obvious ones in the online and digital space. However, not all crisis-triggered consumer behaviours are necessarily technology driven.
- At the same time, consumer behaviours that are unrelated to the current environment may have been somewhat overlooked and present potential investing opportunities.
Consumption has lately been on the mend as governments and central banks roll out massive stimulus packages to help support businesses and consumers in the fallout of the global public health crisis.
Economic activities in the US, for example, reached the year’s low in April, and are recovering in the following months since1. With physical store closures and mobility restrictions, more people have chosen to shop online, as reflected in the rise of e-commerce sales and penetration.
High-frequency economic activities in the US1
Months of mobility restrictions have also changed consumer behaviours. Some new behaviours could be temporary while others are likely here to stay.
While the underlying health of the consumer is dependent on how governments are mitigating the fallout of the global health crisis, we believe fiscal stimulus could be masking the strength of the economy and consumption. Let’s consider the sectors that are less dependent on government support.
Home improvement
As the public health crisis keeps people at home for longer, more are interested in upgrading their spaces, and as a result the home improvement sector is emerging as a beneficiary amid such ‘nesting’ behaviour.
Sales of furniture, garden supplies and sporting goods are expected to continue to rise2.
Some changes are here to stay
Once mobility restrictions are lifted permanently, we believe some changes in consumer behaviour are here to stay. Pet owners have been spending more time with their pets through the crisis. Owning a pet, for example, could present a potential investing opportunity into sectors related to pet ownership in the long run2.
Pet ownership has been rising over the past few decades. Generally, companion animals are not one-off purchases, and pet ownership comes with responsibilities – the provision of food, medicine, vaccines and treatments. The trend of working-from-home has led to a sharp increase in the number of households owning a pet.
Consumption trend in pet care3 in the US
Sustainability and consumption
A growing number of consumers care about sustainability and this is driving their choices in terms of products. One example of this is the rising demand for electric vehicles4, which plays a critical role in reducing air pollution, and in addressing climate change.
With ongoing improvements in technical performance and cost reductions, consumers are increasingly likely to consider buying electric vehicles2.
There’s still more to come
Food delivery is also a growing trend5 and while the health crisis has accelerated the adoption of such services, we believe this demand is likely to persist, especially in the US, China and Europe2.
In the beverage sector, we can find growth opportunities in segments such as energy drinks. Even though people staying at home are not visiting the gym as often, they are still turning to energy drinks.
Functionality, a reduction in sugar, and natural and organic ingredients could also reinforce the demand for energy drinks.
Consumer preference for energy drinks6
Sources: Nielsen, J.P. Morgan Asset Management. Data are as of 31.12.2019. Opinions, estimates, forecasts, projections and statements of financial market trends are based on market conditions at the date of the publication, constitute our judgment and are subject to change without notice. There can be no guarantee they will be met. Not to be construed as research or investment advice. CAGR refers to compound annual growth rate.
Conclusion
Consumption appears to be on the mend and months of mobility restrictions have also changed consumer behaviours. Some new behaviours could be temporary while others are likely here to stay2. ‘Nesting behaviour’ and other demographic changes are increasingly opening up opportunities, often in the less obvious segments of the consumer sector.
Provided for information only based on market conditions as of date of publication, not to be construed as investment recommendation or advice. Forecasts/ estimates may or may not come to pass.
1. Source: App Annie, Chase, Mortgage Bankers Association (MBA), OpenTable, STR, Transportation Security Administration (TSA), J.P. Morgan Asset Management. *App Annie data is compared to 2019 average and includes over 600 travel and navigation apps globally, including Google Maps, Uber, Airbnb and Booking.com. Consumer spending: This report uses rigourous security protocols for selected data sourced from Chase credit and debit card transactions to ensure all information is kept confidential and secure. All selected data is highly aggregated and all unique identifiable information—including names, account numbers, addresses, dates of birth, and Social Security Numbers—is removed from the data before the report’s author receives it. Guide to the Markets – US. Data are as of 30.09.2020.
2. Forecasts, projections and other forward looking statements are based upon current beliefs and expectations. They are for illustrative purposes only and serve as an indication of what may occur. Given the inherent uncertainties and risks associated with forecast, projections or other forward statements, actual events, results or performance may differ materially from those reflected or contemplated.
3. Source: (Left hand side) Euromonitor as at 30.09.2020. (Right hand side). National Pet Owners Survey conducted by the American Pet Products Association, 31.12.2019. Provided to illustrate general market trends, not to be construed as research or investment advice.
4. Source: McKinsey & Company, “Electric mobility after the crisis: Why an auto slowdown won’t hurt EV demand”. 16.09.2020.
5. Source: Frost & Sullivan, “$9.6 billion in Investments Spurring Aggressive Expansion of Food Delivery Companies,” 25.10.2019.
6. Sources: Nielsen, J.P. Morgan Asset Management. Data are as of 31.12.2019. Opinions, estimates, forecasts, projections and statements of financial market trends are based on market conditions at the date of the publication, constitute our judgment and are subject to change without notice. There can be no guarantee they will be met. Not to be construed as research or investment advice. CAGR refers to compound annual growth rate.
Investment involves risk. Not all investments are suitable for all investors. Past performance is not a reliable indicator of current or future results. Please refer to the offering document(s) for details, including the risk factors. Investors should consult professional advice before investing. Investments are not similar to or comparable with fixed deposits. The opinions and views expressed here are as of the date of this publication, which are subject to change and are not to be taken as or construed as investment advice. Estimates, assumptions and projections are provided for information only and may or may not come to pass. This document has not been reviewed by the SFC. Issued by JPMorgan Funds (Asia) Limited.
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