wall street

The End of the Pandemic Boom Is Nigh

Now with a little less shine. Photo: Cedric Ribeiro/Getty Images for Netflix

Much of what made investors rich during the pandemic is crumbling. The value of Netflix dropped by $45 billion in one day. Peloton has halted production on some of its exercise equipment. Bitcoin has lost almost half its value since its November peak. The pandemic isn’t over, but the Leave Home market has begun.

Even before the Omicron variant started spreading with a vengeance throughout the U.S., Wall Street has been betting that the pandemic-era economy is in its end of days. Since the market crashed in March of 2020, the Dow Jones has doubled in value, pumped up by companies that made more money as people spent more of their lives at home. But as lockdowns eased and vaccines became more widespread, the writing has been on the wall. Zoom, the video-chat service that’s become the bane of work-from-home existence, is worth about a quarter of what it was worth at its October 2020 peak. Logitech, which makes headsets and webcams, has lost about half its value since June. This week’s twin cratering of Peloton and Netflix was just the most recent blow to the pandemic economy — and their sudden falls sent peers like Disney skidding, too, as the growth of streaming audiences is expected to slow.

Again, this is not to say that the pandemic is over. “If you think about 150,000 hospitalized because of Omicron, 750,000 cases a day, that would have shut us down 18 months ago,” John Lynch, the chief investment officer at Comerica Wealth Management, told Intelligencer. The reality is that when COVID-19 first came to U.S. shores in early 2020, the economy shifted along with it. The government propped things up through an unprecedented series of explicit stimulus measures, like the $5 trillion that went to people and businesses and the Federal Reserve dropping borrowing rates to zero, in addition to other accommodations, like pausing evictions, freezing student-loan payments, and buying bonds. It all meant that people had more money to spend. All of these measures, however, are either done or about to be. And so the economy is shifting yet again.

Crucial to all this is the Fed. The central bank is expected to start ratcheting up interest rates as soon as this March in a bid to keep inflation from spiraling out of control. This also means that businesses — which rely on borrowed money to keep operating — are going to spend more on interest payments than, say, employee salaries or goods. Next week, the Fed’s chair, Jerome Powell, is expected to give a press conference that will give some hints as to how high and how fast rates will rise. Already, Wall Street titans like JPMorgan Chase CEO Jamie Dimon are expecting the central bank to increase rates five or more times, which would be the steepest increase since 2005.

Meanwhile, many winners of the pandemic economy are running out of steam. The Nasdaq Composite, a stock index of technology companies, just had its worst week since 2020, dragged down by giants like Amazon. Even Bitcoin is at its lowest point since July, as it increasingly moves in the same general direction as the stock market. With the Omicron wave now possibly past-peak in the U.S., investors have decided that safer, more established companies, like Procter & Gamble, or even just regular old Treasury bonds, are a better bet. Even if the economy never turns back to 2019 — and surely it won’t — consumers’ pandemic habits could only continue for so long. “Everybody already has Netflix,” noted Lynch. “Who else is gonna get it?”

The End of the Pandemic Boom Is Nigh