By: First Union
Will Giant Companies Dominate the Market Post Pandemic?
The pandemic brought many a small business to its knees. Some sadly, could not weather the storm and ultimately closed their doors. On the flip side, there were several large corporations that not only weathered said storm but thrived doing so. Companies such as Microsoft and Amazon for example are emerging from this with a measurable increase in demand for their shares. After all, their business models were perfectly designed for a global crisis like the one we just experienced.
So what do experts predict as far as what the future holds for the country's biggest brands…Ultimately, they will see even more growth, more profitability, and will exert even more influence and power than they already do.
Take Amazon for instance. Their business model couldn't have been more suited to the coronavirus. And they proved this every step of the way. They became one of the most successful businesses during the pandemic and subsequently never slowed down as far as fulfilling orders. It also didn't hurt of course that Amazon along with the likes of Apple and Microsoft had a mountain of cash reserves on hand, thereby keeping them from feeling the crunch even a little bit, unlike smaller and medium-sized companies who had to get very creative in terms of cash flow to stay afloat.
Many experts also argue that a huge contributing factor to the current and undoubted future success of these giants is the fact that the economy is hurting right now and is expected to potentially make an even bigger downturn. The competition will naturally be thinned out as a result, and those with massive balance sheets and an economic safety net will consequently come to dominate, period.
Recent information released by Goldman Sachs shows that the top 10 stocks in the S&P 500 for May accounted for almost thirty percent of the total index value. This is no small number. And it hasn't been seen since the tech stock boom of the 90s.
A Trend That's Been Brewing…
Even though in the past few weeks we have seen much of the market wealth centered on the biggest brands, this is one trend, many suggest, that has been growing in recent years, even before COVID-19. Ever since the Great Recession, we are seeing more and more consolidation within various industries, leading to the emergence of giant companies.
Smaller companies have greater debt, not to mention they have less of a global presence, meaning, this made them heavily reliant on the US economy, which as we've seen significantly tanked during the crisis. On the other hand, the scenarios posed by the virus played right into the hands of the biggest names. And while such giant businesses won't necessarily be immune to the effects of COVID-19, they certainly understand how to take advantage of the opportunities presented.