Take Walmart Inc., for example. Back in 1980, the big-box retailer’s warehouses would have been packed with more people per square foot, with less automation running the operations than now, according to Fuller. Just a few months ago, the nation’s biggest grocer unveiled a robot-run warehouse to increase efficiency and compete with Amazon. Both companies’ shares have gained in 2020, while the S&P 500 is down 11%.
In addition to a more automated workforce, Fuller also highlights the penetration of broadband nationwide and big upgrades in what’s standard for computers -- built-in cameras and microphones -- as significant improvements, though ones falling disproportionately on the rich. Such innovation has allowed white collar employees across multiple industries to work from home, without sacrificing much in terms of productivity.
Last week after reporting earnings, Twitter Inc. CEO Jack Dorsey said he’s seen “no significant decrease” in employee productivity even though everyone is working from home, and that he could see a version of this work format existing long after Covid-19. Last month after releasing results, Morgan Stanley CEO James Gorman told Bloomberg Television that the firm has proved it “can operate with no footprint.”
Not only do fewer jobs require mandatory face-to-face human interaction across public corporations, but investors can be thankful that market-cap weighted equity benchmarks are optimized in a way to better weather stay-at-home orders.
The two best performing S&P 500 sectors this year -- information technology and health care -- just happen to hold the largest weights in the index. Both have fallen less than 3%, and combined, the two industries make up 41% of the S&P 500.
Big gains in industries at the forefront of automation and innovation have increased their market clout. Software firms make up 9% of the S&P 500, roughly two percentage points more than they did at the start of the year. A group of internet retail companies including Amazon and eBay Inc. is now the seventh largest weight of 69 industries -- up three spots in five months. Meanwhile, banks have dropped seven spots to slot number nine.
According to Bloomberg Intelligence strategists including Gina Martin Adams, the S&P 500 health-care sector is “well positioned for a socially distanced world.” Sam Palmisano, former CEO of International Business Machines Corp., says use of technology within health-care practices could be here to stay.
“Fundamentally at the end of the day, it’s a whole different way of practicing medicine,” he said of telemedicine on Bloomberg Television last week. “People will get used to that, and if you have the option of not going to the doctor’s office and waiting in the reception area for, as you know, a very long time sometimes because things happen, that could be attractive to you.”
Other industries outperforming the market are consumer-facing, too, including consumer discretionary, communication services and consumer staples firms. On the flip-side, if you zero in on the companies most negatively affected by the virus, including airlines and leisure stocks, they only make up 10 to 20% of the S&P 500, according to Jack Janasiewicz, a portfolio strategist at Natixis Investment Managers, which oversees $1 trillion.
“The eye opener is when you look at the ones you are worried about. It’s not a big chunk of the S&P 500. It’s the old adage where the market isn’t the economy,” he said. “That really hits an important piece here. A lot of the stuff we’re worried about, it’s just not a big chunk of the S&P 500, so maybe we did overreact by selling off 35%.”