Amid the chaos one thing, at least, is clear: a few powerful firms are set to gain more clout
rich world, governments and economists are scrambling to work out how costly virus-related lockdowns will be. Will the economy shrink by a tenth or a third? Is the slump going to last for three months, six or more? No one can say with any precision. A similarly unnerving and inexact exercise is happening in boardrooms as firms try to estimate by how much their cashflows will fall and whether they have the resources to survive.
Downturns are capitalism’s sorting mechanism, revealing weak business models and stretched balance-sheets. In the past three recessions the share prices of American firms in the top quartile of each of ten sectors rose by 6% on average, while those in the bottom quartile fell by 44%. The drop in sales and profits in 2020 will be much steeper, though hopefully shorter, than in a typical slowdown.
Silicon Valley and Big Pharma dominate . Technology firms make up 48 of the top 100. The likes of Microsoft , Apple , Facebook and Alphabet operate with big cash buffers. Demand for some of their products is surging: Microsoft’s team-working software, for example. Another 24 are health-care firms. Many have spare cash and a captive market of people in need of drugs. Plenty of the weaklings are in the ailing transport, retail and recreation industries .
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