• The COVID lockdowns created bizarre anomalies in Labour market data that seems to have finally returned to pre-pandemic levels.
• The death of the high street never materialised as retail shops and supermarkets bounced back strongly from their pandemic crash.
• Zoom surged over 400% in a matter of months post pandemic, before crashing down over 85% in the years since.¹

We are just over a week away from the 5-year anniversary of the first COVID lockdown in the UK (23 March 2020) and thought it timely to review the impact the pandemic has had (and continues to have) on the global economy and stock markets. Firstly, macroeconomic data, particularly surrounding labour markets, is only just getting back to pre-pandemic levels. The chart below shows wage growth in the US over the last decade. It’s clear to see the anomaly in the data that the pandemic created, but at 4.3%, we’re finally back to pre-COVID levels. This is good news for the US economy as wage growth, without productivity gains, risks inflation.

US Wage Growth (%)

Source: Tradingeconomings.com

The next chart looks at US unemployment over the last decade. Once again, you can see the clear anomaly in the data that the pandemic has created. However, it’s not an anomaly. Unemployment did spike and it was not without consequence. Many Americans did not return to work after being laid off in the pandemic, which is evidenced through the labour force participation rate never recovering to pre-pandemic levels. Unemployment has crucially remained low though and it’s this resilience in the labour market that has allowed the Fed to keep interest rates higher to tackle inflation. However, we have begun to see that rate tick up over the past nine months and with uncertainties surrounding trade policy, we could definitely see cracks emerge in a labour market that seems to have fallen back to pre-pandemic levels scot-free.

US Unemployment (%)

Source: Tradingeconomics.com

Secondly, the impact on retail is a great example of Buffett’s famous quote: ‘be fearful when others are greedy and greedy when others are fearful’. It was initially suggested that the pandemic would be the death of the high street. You saw Dunelm’s share price halve in six weeks from the 14^th Feb. In the same time period, M&S fell 45%, Next fell 48%¹. Nestled in that six-week window, Ocado’s share price surged 37% in just five days and was up 160% by the following February in anticipation of the country switching to online food shopping. However, the trend was quickly bucked as, to investors’ surprise, it turns out that shoppers value the experience. Ocado’s share price is now down 81% over 5 years, whilst M&S is up 262%¹.

We think that, just because change is ready and available, it doesn’t mean that it’s always welcome. As much as the death of the high street was touted, the death of the office was too, with remote working (where possible) becoming the norm during the pandemic. Zoom, the communications technology company we’ve all become familiar with, endured a gruesome game of two halves. The share price rocketed over 400% between March 2020 and October 2020, before giving up all those gains and then some in the years since – an investor would be sitting on a loss of 87% if they bought on 16 October 2020¹.

Bowmore portfolios

One of the key takeaways from the above points is actually to focus on the medium-term (3-5 years). If you had worried about the short-term impact of that massive spike in unemployment or collapse in wage growth, you would have missed out on the strong V-shaped recovery of stock markets and subsequent bull run from April 2020, until the end of 2021. Equally, if you had focused on the long-term trends the pandemic would create, i.e. everyone switching to online shopping or working from home forever, you’d have had great short-term success but be losing money over 5 years. We believe focusing on that sweet spot of 3-5 years allows us to avoid those pitfalls. A great current example is our slightly defensive stance in the US. We aren’t overweight semiconductor and AI companies (the short-term play), nor are we getting too excited about the productivity gains or the incredible implications it could have for pharmaceutical research that may be a decade away.

Source: LSEG Datastream as at 14 March 2025

Other sources: ¹ Share Price Performance figures from Refinitiv, 13 March 2025.

The value of your investments can go down as well as up, so you could get back less than you invested. Past performance is not a guide to future performance.