“The economic cure to the disruption of Covid-19 will not be resurrecting yesterday’s economy,” think Goldman Sachs. Instead, the Wall Street bank believes the answer lies in “retooling” failing companies, replacing those that cannot change, and letting the winners consolidate and expand.
This somewhat Darwinian framework is the starting point for a recent thought-piece on the pandemic, which authors Steve Strongin and Deborah Mirabal call ‘The Great Reset’. Over 11 pages, and without mentioning a single specific stock, the report sketches out Goldman’s thoughts on how investors should approach “the business and investing landscape post-Covid-19”, without specifying how or when that all-important period is likely to begin.
In fact, the missive gives the impression that, amid the economic and corporate debris around them, investors already have half a foot in a “post-Covid-19” world. For a start, the primary phase that Goldman identifies is preservation, during which time uncertainty forces companies to focus only on the immediate concerns of funding and balance sheet repair. This won’t be news to many stock-pickers in June 2020, although Goldman suggests that this period is likely to see plenty of misallocated or wasted capital.