Lessons from COVID-19: What One-Hit Wonders Taught Us

The COVID-19 pandemic has been a seismic event, reshaping industries and economies in ways that were once unimaginable. As we move into a post-pandemic world, it's crucial to reflect on the lessons learned from the sectors that were most impacted. These "one-hit wonders" offer valuable insights into the vulnerabilities and strengths of various industries, providing a roadmap for better preparedness in future crises.

One of the most dramatically affected sectors was the airline industry. The sharp decline in air travel due to lockdowns and social distancing measures led to a 174% increase in the probability of default (PD) from January 2020 to January 2022. This stark reality underscores the importance of diversification in investment portfolios. Relying heavily on a single industry, especially one as volatile as airlines, can be risky during times of crisis. Investors must consider the long-term recovery prospects of an industry before making investment decisions. For the airline sector, recovery may take several years, and investors should be prepared for a prolonged period of uncertainty.



The hospitality sector, which includes hotels, restaurants, and leisure activities, also faced significant challenges. The median PD for this industry peaked in April 2020 but had declined substantially by January 2021. However, the industry remained at a higher level of risk throughout 2021 compared to the baseline in January 2020. This highlights the need for investors to consider the long-term recovery prospects of an industry before making investment decisions. In the case of the hospitality sector, it may take several years for the industry to fully recover from the pandemic, and investors should be prepared for a prolonged period of uncertainty.

The energy equipment and services industry also faced significant challenges during the pandemic, with a high median PD throughout 2021. This was due to the sharp decline in demand for energy as a result of lockdowns and reduced economic activity. Investors in this industry should consider the potential for future disruptions in demand and the need for diversification in their investment portfolios.

In contrast, the courier services industry experienced a 25.2% increase in employment from the start of the pandemic to March 2024. This was due to the increased demand for home delivery as a substitute for in-person shopping. This highlights the importance of identifying industries that are likely to benefit from changes in consumer behavior during a crisis. Investors should consider the potential for future disruptions in consumer behavior and the need to adapt their investment strategies accordingly.

The pandemic also exposed vulnerabilities in the automotive industry, with a significant increase in the probability of default. The sharp decline in demand for new vehicles due to economic uncertainty and supply chain disruptions led to a high median PD throughout 2021. This highlights the need for investors to consider the potential for future disruptions in supply chains and the need for diversification in their investment portfolios.

The performing arts and spectator sports category saw a 52.0% decrease in employment in the first months of the pandemic but has since regained most of the lost jobs and is now 19.5% above the pre-pandemic level. The highest-paying sector, professional, scientific, and technical services, has also had rapid job growth, with employment now 13.1% above the pre-pandemic level. It has accounted for 21.9% of the net job growth since the pandemic, the largest of any single sector.

In conclusion, the COVID-19 pandemic has provided valuable lessons for investors on the importance of diversification, long-term recovery prospects, and the need to adapt to changes in consumer behavior. By learning from these one-hit wonders, investors can better prepare for future crises and make more informed investment decisions. The pandemic has exposed vulnerabilities in various industries, highlighting the need for investors to be more prepared for future crises. By diversifying their investment portfolios, considering the long-term recovery prospects of an industry, and adapting to changes in consumer behavior, investors can better navigate future crises and make more informed investment decisions.