Should your portfolio reflect the “new normal” for business?

How and where we work is changing rapidly—should your investments evolve too?

Business in America is Evolving – Should Your Portfolio Evolve with It? In the mid-1800's, the Industrial Revolution landed in America, transforming the nature of work for nearly every American. Workers largely left their farms and homes to take their place on the factory floor, eventually moving onto assembly lines. In the decades that followed, American workers would leave the factories and move into office buildings, as the U.S. evolved from an industrial economy into a service and consumption-based economy. Today, as if coming full circle, the pandemic may be sending American workers back home permanently. According to the polling firm Gallup, the number of Americans working from home has at least doubled, but maybe tripled, since before the pandemic hit. A poll in May found that 52% of employed Americans reported always working from home, while 18% said they sometimes work from home. Many corporations are upping the ante even further – a Microsoft survey of managers and CEOs found that 82% plan to implement more flexible work-from-home policies going forward. Google made headlines last week by announcing it would keep nearly 200,000 employees working from home until the summer of 2021, the most extreme position taken by a major corporation to date. 1 There are a few downstream investment implications of this potential "work-from-home" revolution: higher vacancy rates for office buildings in major cities, falling rents in major cities as people move away from densely packed urban centers, less business travel, significantly higher spending on home office equipment like ergonomic chairs, monitors, faster internet speeds, laptops, and so on. I have noticed quite a bit of investor enthusiasm about getting ahead of these rapid-fire changes. Portfolios are being adjusted to capture trends and to heavily invest in companies building and servicing the digital economy, while reducing holdings in hospitality, retail, airlines, and basically any other area of the economy that does not have a foothold in technology. While I applaud adjusting a portfolio in light of secular changes in the economy, my worry today is that the pendulum is swinging too far, too fast. Don't Make Assumptions About Where the Economy is Going, Stick to the Data! While some companies or industries may appear to have a strong foothold in the future of the economy, you should not forget the importance of diversification. Take a lesson from what we saw in the dot-com bust - many investors rushed to position portfolios in companies that they assumed would succeed in the new economy, only to find out down the line that a majority of them failed. So, instead of narrowing in only on what could be the next big thing, I recommend keeping your eye on the data, fundamentals and a diversified approach. Our just-released stock market outlook report can help you do this as it looks at Zacks S&P 500 top picks as well as other key factors impacting the market today, such as: S&P 500 yearend targets Is it time to buy stocks? What should you think about 'unbelievable' jobs data? International outlook Zacks Rank S&P 500 sector picks Impacts of Coronavirus And much more. If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today! IT'S FREE. Download the Just-Released August 2020 Stock Market Outlook2 Business in America is indeed evolving – fast. But my view today is that too many assumptions are being made about what the economy will look like six months from now, and portfolios are being adjusted hastily in response. There is a growing narrative that workers may never return to offices, business travel may become obsolete, and retail stores will become a relic of the past. While these outcomes may all take place in varying degrees, I think many investors are over-correcting. The 'new economy' that many people are imagining is one that will take years or decades to develop. Companies across the spectrum are learning quickly about the successes and failures of remote work, and what tools and software are ideal for business. In the next year or two, I think we could see an enormous amount of turnover in the tech space, with fortunes being made and lost as innovators and upstarts jockey for market share with new inventions. This is why I think investors should tread carefully – not because I do not believe that changes are coming, but because too many assumptions are being made about who the winners and losers are going to be. We saw a version of this outcome during the dot-com bust, when investors rushed to position portfolios in companies that surely would be 'home runs' in the new economy. A majority of them failed. Bottom Line for Investors Many companies are moving quickly to adopt new technologies and processes in the wake of the pandemic. CEOs and management teams are shuffling around how they do business, and rethinking organizational structures. This type of planning will no doubt change how we do business in America. But what I think we will find is that, in time, many of these new processes or software or organizational structures simply will not work. They may need to be reinvented several times over, and certainly will be tweaked along the way. For investors trying to get ahead of the major changes in business today, it may mean giving up a diversified investment approach in an effort to chase companies and trends that do not catch on, or that do catch on but ultimately get upended by a different innovation or technology. In a time of rapid change, sometimes it's best to take your time. So instead of chasing the heat and rushing to invest in companies based on assumptions, I recommend sticking to the data, fundamentals and a diversified approach. To help you do this, I am offering all readers our Just-Released August 2020 Stock Market Outlook Report. This Special Report is packed with newly revised predictions that can help you base your next investment move on hard data. For example, you'll discover Zacks' view on: S&P 500 yearend targets Is it time to buy stocks? What should you think about 'unbelievable' jobs data? International outlook Zacks Rank S&P 500 sector picks Impacts of Coronavirus And much more. If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today! FREE Download – Zacks' August 2020 Stock Market Outlook Report3 ABOUT ZACKS INVESTMENT MANAGEMENT Born from Research – Built for Performance Zacks Investment Management was born out of one of the country's largest providers of independent research, Zacks Investment Research. Our independent research capabilities from our parent company truly distinguish us from other wealth management firms - our strategies are derived from research and innovation, including the proprietary Zacks Rank stock selection model, earnings surprise and estimate revision factors. At Zacks Investment Management, we work with clients with $500,000 or more to invest, and we use this independent research, 35+ years of investment management experience, and tools we've developed to design customized investment portfolios based on each client's individual needs. 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