COVID-19, soaring stock markets and the implications for business

The stock market has many puzzled. Here’s our explanation.

In the middle of the deepest recession in memory, stock markets are reaching new highs. Why the disconnect? To understand the conundrum, McKinsey experts point to three factors. First, many investors still take a long-term perspective; they are looking ahead to the end of the pandemic. Another factor: five big-tech companies now make up 21 percent of the S&P 500, one of the world’s most-watched markets. And smaller, unlisted companies have absorbed a lot of the economic damage, such as the dramatic rise in unemployment. The overall stock market can do relatively well even when employment and GDP are severely depressed (exhibit).

Investors may also be focused on the vast differences in resilience at companies. We interviewed leaders at several UK companies that have done better than others during the crisis. What distinguishes them, in a word, is agility. From a common purpose to rapid decision making to empowered local teams, these companies found ways to respond quickly to COVID-19. A key finding: war-gaming for a no-deal Brexit built a solid foundation for supply-chain resilience.

A new podcast this week examined those same supply-chain issues, in the context of McKinsey Global Institute’s August 2020 report on risk and resilience. Experts Ed Barriball and Susan Lund explain the research finding that, on average, companies can expect a disruption to their production lines of one to two months—a very long time—every three-and-a-half to four years.

Another podcast lays out the path forward for the US retail industry; our experts explain what it means for the industry when so many categories are tilting toward online shopping. Short answers, from senior partner Becca Coggins: “we’re in the foothills of what omnichannel-driven convenience will look like” and “some big innovations will scale, now that consumer expectations have been reset.” In another report, we examined the same forces and their effect on Middle East and Africa retailers.

You can see a full set of the McKinsey briefing notes on https://www.mckinsey.com/