Travel has started to rebound since the coronavirus pandemic battered the industry.seb_ra/iStockPhoto / Getty Images
Let’s time warp back to 2020. Remember “experts” shrieking how COVID unleashed a “New Normal” upon everyone? The travel industry is doomed! Dining out is dead! Supply chains are broken! Handshakes and hugs are history! But now economic normalcy has returned, and those same New Normal knuckleheads call that risky. They fall prey to FEAR (false evidence appearing real). Ignore them. Instead, look to CHEER (celebrate hidden examples of equilibrium’s returning.) False doomsday predictions are obscuring this hugely bullish force.
Yes, 2020′s shutdowns wreaked havoc on economies and accelerated significant real changes. They turbocharged online commerce and the rise of delivery services. Work shifted from the office to home, a trend which may never fully revert. Even employers favouring return-to-office admit hybrid work seems here to stay. Canada’s commercial real estate vacancy rate soared and is now at 18.2 per cent, dwarfing 2019′s 10.9 per cent. That stirs uncertainty in property markets, but also potentially reduces companies’ long-run real estate costs.
But many of the stressors, once feared permanent, have quietly vanished. Consider travel. Canada’s third-quarter travel spending jumped 7 per cent year-over-year and is now within 12 per cent of its peak in the third quarter of 2019. Tourism employment is within 4 per cent of prelockdown levels. U.S. 2023 air passenger volumes exceeded 2019 levels to set new records. The Global Business Travel Association finds corporate travel accelerating above expectations – and expects it to top pre-COVID levels in 2024. Yes, this remains below prelockdown tourism growth trendlines – where things would be if COVID never happened – but it utterly disproves claims of massive, scary paradigm shifts. CHEER!
Elsewhere, COVID-era supply chain chaos vanished. The New York Fed Global Supply Chain Pressure Index ended 2023 right around its historical average since 1997 – the huge snarls of the pandemic have unsnarled fast. Yes, recent Red Sea attacks just stoked shipping prices, but rates remain far below nosebleed COVID-era heights. The fact that oil tanker freight prices are not soaring suggests investors appreciating a key economic lockdown lesson: Global supply chains adapt lightning-fast when squeezed. Canadian and U.S. manufacturing supplier delivery times improved throughout 2023. West Coast rail strikes and St. Lawrence Seaway work stoppages proved mere hiccups. Meanwhile, “just-in-time” manufacturing is back, supplanting the “just-in-case” COVID mindset that drove inventory gluts, when overstocking was seen as the best antidote to potential shortages.
Additionally, the Bank of Canada, U.S. Federal Reserve and other global central banks ended their kooky monetary responses to COVID. The end of those moves underpinned inflation’s 2023 ebbing. So, please, CHEER that Old Normal’s returning.
Pundits turn other Old Normal milestones into outright negatives – classic “pessimism of disbelief” behaviour, whereby pessimists envision emerging good things as bad things, making their sentiment worse. Many, for example, shriek about how America’s plunging personal rates reveal tapped-out consumers. No. Look deeper.
U.S. personal savings peaked at a bloated 26.1 per cent of post-tax income in March, 2021, dwarfing today’s 4.1 per cent. But lockdown-era savings spikes were hugely anomalous; we saw America dishing out “stimulus” payments while lockdowns limited spending options. From 2000 through 2019, U.S. personal savings rates averaged 5.2 per cent. During America’s 2002-07 bull market, it averaged 4 per cent – just below today’s level. And that isn’t far off Canada’s 5.1 per cent, which few fret. More normalcy. CHEER-y!
Money supply? In October I showed you how central bank blunders bloated it during the pandemic, hypercharging inflation and how that was now reversing. That unwinding continues. Canadian M2++ money growth – the broadest measure – increased just 2.4 per cent year-on-year through November versus the 14.3-per-cent explosion of early 2021.
US M4 growth remains slightly negative, sparking worry. Normally, I might worry, too. But central bankers’ insanely opening monetary firehoses while COVID lockdowns restricted businesses’ capacity and abilities to deliver product wasn’t normal. It spurred rampant inflation. A miniscule U.S. M4 pullback – down -1 per cent year over year through November – signals normal sanity’s return. CHEER it all!
China? Headlines incessantly herald impending doom for the global growth engine, harping on real estate worries, slowing manufacturing and construction. The reality is that China’s GDP grew about 5.2 per cent last year, just below 2019′s 5.9 per cent. That continues a long, natural arc of slowing growth as its huge economy matures – as happens with all maturing economies. 2024 will merely continue the trendline. CHEER it with an Old Normal high-five! (They are back – handshakes, too!)
Today’s normal isn’t identical to 2019′s. One notable twist: interest rates. But fundamental forces such as inflation’s slowing suggest U.S. and Canadian yields’ postautumn plunges are no fluke. Maybe we never revisit the 2010s’ super-low rates. Fine. Stocks and economies rose with very comparable rates to today’s through most of history – the very old, very normal Old Normal.
Pandemic frustrations made pre-COVID life seem all roses and sunshine. It wasn’t. The Old Normal wasn’t perfect. No period ever is. And we always want progress through innovation. But markets never needed perfection to rise – and don’t now – just “good enough” to relieve most existing fears somewhat. The Old Normal delivered that aplenty. So, tune down the current scary stories du jour and CHEER most of the Old Normal’s return.
Ken Fisher is the founder, executive chairman and co-chief investment officer of Fisher Investments.
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