In focus

Which lockdown habits could last a lifetime?

Prediction is very difficult, especially about the future.” This cautionary quip, attributed to Nobel Prize winning quantum physicist Niels Bohr, is applicable to anyone making forecasts, and particularly investors at this point in time.

Stock markets will continue to be buffeted by daily newsflow around the pandemic. Successful investing in consumer stocks over the next couple of years, however, will depend on developing a vision of post-pandemic consumption patterns with the help of a clear framework.

Where lifestyle changes are permanent, extrapolating the trends of the past year could well be fruitful. On the flipside, riding a “reversion to the mean” might be the right investment approach for those businesses poised to rebound, once restrictions are eased and where old behaviours could return.

And, of course, avoiding those stocks where the market is wrongly assuming that lockdown dynamics extend long into the future will be crucial.

Understand the factors that drive habit formation

The academic literature suggests it can take up to 254 days to form a habit (How are habits formed: Modelling habit formation in the real world. European Journal of Social Psychology. October 2010). Since most consumers have now been dealing with pandemic-related restrictions for at least that long, one might jump to the conclusion then that our new routines are here to stay.

However, psychologists and behavioural experts also talk about a “habit loop”, which has three components – “contextual cue”, the behaviour itself, and the reward (Healthy through habit: Interventions for initiating & maintaining health behavior change. Behavioral Science & Policy).

As the public health situation normalises, key parts of the habit loop will be broken: some of the contextual cues forced by the pandemic (e.g. home schooling) will be absent. And, importantly for us, the reward may be more easily achieved via pre-pandemic behaviours.

Using the habit framework outlined above, the changes that are most likely to be “sticky” are the ones that bring a reward that can’t easily be replicated once restrictions are eased. The table below outlines our views on what this means for some of the major trends.


If investors can correctly anticipate what happens to post-pandemic behaviour, it will allow them to build “positive growth gaps” in their forecasts for companies benefiting from these trends. Equally, they’ll be able to avoid ones where the market is wrongly extrapolating ephemeral changes.

It is positive growth gaps which drive share price outperformance. If a company achieves results that are superior to those expected by consensus and those priced in by the market, then that company’s share price is likely to outperform.

Changes in way companies do business can have profound investment implications

The impact of these trends on revenues is obvious. The biggest rewards, however, will come from identifying those companies which have been able to change the way they do business with a potential lasting positive impact on profitability and returns.

Investors will need to develop a framework to judge how enduring the lifestyle changes seen during the pandemic will be. Then, through modelling their long-term impact on company fundamentals – to identify positive growth gaps – they should make good investments.

Volatility and misleading short-term share price movements lie ahead. These, however, should only increase the opportunity for those with a clear vision to buy the right companies at attractive prices, knowing they are beneficiaries of durable changes in habit.

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