Covid-19 index: when might life return to ‘normal’? – May 2021

Insights

Covid-19 index: when might life return to ‘normal’? – May 2021

As one of the world’s largest economies the US is a key focus for investors. With every country attempting to return to normality following the coronavirus pandemic, we are monitoring when US economic activity might get back on track, as well as other measures of “normality” such as entertainment and leisure, high street shopping, and schools reopening. The result is an index that measures progress toward a post-pandemic world.

Our Return to Normal index

As the US continues its Covid-19 vaccination program, the Return to Normal Index measures human activity data relative to pre-pandemic levels. The index is constructed by our data scientists and fundamental analysts and tracks activities in the US, including travel, returning to work and school, brick-and-mortar shopping and eating out. By design, the index is focused on measuring components of daily life rather than economic indicators such as GDP growth. The percentage level will move closer to 100 as daily life normalises, and our analysts will update it on a regular basis.

What has changed?

Since our April update, the Return to Normal Index has climbed further, to 72%, fuelled by gains in travel, entertainment and a return to in-person schooling. Now that immunity levels are increasing – through a combination of vaccinations and prior infections – we expect to see a continued decline in active cases over the next couple of weeks. As a base case scenario, we expect the index to advance over the month of May as greater immunity and seasonal factors push activity levels higher. If there are no significant setbacks, the US could reach the normal range by August. We are continuing to watch the data on variants in the US, and if we see a large spike in cases, the momentum carrying the country to our normal range could slow.

Activity numbers won’t all return to where they were before Covid. The index could hit “normal” at a point lower than the 100 level due to continued changes in behaviour, like working from home and reduced business travel. The definition of the future normal is evolving, and the index’s normal threshold will reflect our data science and fundamental research insights.

Figure 1: The Return to Normal Index tracks activity compared with pre-pandemic levels as we progress to post-Covid life

May 1 72 percent of normal range

Source: Columbia Threadneedle Investments, 1 May 2021

What are we monitoring, and where is it at?

We are analysing the time people spend engaging in a broad set of activities outside their homes (Figure 2). The index components have implications for economic growth, but the primary objective is to monitor how close or far we are to returning to normal life.

Figure 2: Tracking inputs

Graph Index Normal life

Our index suggests we are still 28% below pre-Covid activity levels. The levels of component activity vary: the return to brick-and-mortar stores is 18% below its pre-Covid level and a normal work routine is 23% below. The subcomponent with the lowest level is travel/entertainment: 43% below pre-Covid levels.

What could drive change?

Faster vaccine distribution and uptake could accelerate the path to normal (ie, the upside case). Developments that could impede a return to normal (ie, the downside case) include the emergence of variants that are resistant to current vaccines or slower uptake of the vaccine in certain places (because of people’s unwillingness to get vaccinated or shortfalls in supply).

Figure 3: The Return to Normal Index over time – level as of 1 April 2021: 66%

Upside case of normal range graph

Source: Columbia Threadneedle Investments, 1 May 2021

This index provides a framework as we analyse companies. It is a roadmap for what normal activity might look like after Covid and how long it will take to get there. The information allows us to test a company’s own assumptions and make adjustments in our views as needed.
For investors, the Columbia Threadneedle Return to Normal Index can act the same way: it’s an additional input to consider as they research their individual asset allocation and portfolio decisions.

Understanding where we are on the path to normal life will be a critical question in 2021. This data can help inform investors’ asset allocation decisions and set expectations on market activity.

6 May 2021
Paul DiGiacomo
Paul DiGiacomo
Head of Equity Research
Share article
Key topics
Related topics
Listen on Stitcher badge
Share article
Key topics
Related topics

PDF

Covid-19 index: when might life return to ‘normal’? – May 2021

Important Information

The research and analysis included on this website has been produced by Columbia Threadneedle Investments for its own investment management activities, may have been acted upon prior to publication and is made available here incidentally. Any opinions expressed are made as at the date of publication but are subject to change without notice and should not be seen as investment advice. Information obtained from external sources is believed to be reliable but its accuracy or completeness cannot be guaranteed.

Related Insights

2 October 2024

Natalia Luna

Senior Thematic Investment Analyst, Global Research

Pauline Grange

Portfolio Manager

US election: the Inflation Reduction Act (IRA) and the risk of repeal - Implications for investors

The multi decade transition to green energy should remain intact. We explain why and highlight companies set to benefit.
Watch time - 10 mins
23 September 2024

Albertine Pegrum-Haram

Climate Change Analyst

Claire Robbs

CFA, Credit Analyst, Investment Grade Credit Research

Robert Whitworth

CFA, Equity Analyst, Fundamental Research Team

Can the demand for critical minerals be met responsibly?

A secure and consistent supply of critical minerals is fundamental to the energy transition and to achieving net-zero, but demand is putting pressure on supply chains and costs, and risks polarising sentiment around the energy transition.
Read time - 7 min
16 September 2024

Shengsheng Zhang

Director, Quant Strategist

Yu-Ting Fu

Associate, Corporate Governance Analyst

How does board gender diversity affect stock risk?

Companies with insufficient board gender diversity have higher idiosyncratic risk, so how can portfolio managers go about mitigating this?
Read time - 8 min
14 October 2024

Steven Bell

Chief Economist, EMEA

UK interest rates: Bad news from the US, good news from Europe, what will the Budget bring?

Why we expect the pace of rate cuts to slow.
8 October 2024

Fixed Income Desk

In Credit - Weekly Snapshot

In Credit Weekly Snapshot – October 2024

Our fixed income team provide their weekly snapshot of market events.
8 October 2024

The climate risk ‘hot potato’– which sector will be left with burnt fingers?

A secure and consistent supply of critical minerals is fundamental to the energy transition and to achieving net-zero, but demand is putting pressure on supply chains and costs, and risks polarising sentiment around the energy transition.
true
true

Important Information

The research and analysis included on this website has been produced by Columbia Threadneedle Investments for its own investment management activities, may have been acted upon prior to publication and is made available here incidentally. Any opinions expressed are made as at the date of publication but are subject to change without notice and should not be seen as investment advice. Information obtained from external sources is believed to be reliable but its accuracy or completeness cannot be guaranteed.

You may also like

Investment approach

Teamwork defines us and is fundamental to our investment approach, which is structured to facilitate the generation, assessment and implementation of good, strong investment ideas for our portfolios.

Funds and Prices

Columbia Threadneedle Investments has a comprehensive range of investment funds catering for a broad range of objectives.

Our Capabilities

We offer a broad range of actively managed investment strategies and solutions covering global, regional and domestic markets and asset classes.

Thank you. You can now visit your preference centre to choose which insights you would like to receive by email.

To view and control which insights you receive from us by email, please visit your preference centre.

Woman listens to music through headphones
Play Video

CT Property Trust- Fund Manager Update

Sed ut perspiciatis unde omnis iste natus error sit voluptatem accusantium doloremque laudantium