The first half of 2024 has been undeniably dominated by the AI narrative. Big Tech, with their AI-powered innovations, have propelled the S&P 500 to new heights, captivating investors’ imaginations and wallets. While the allure of AI is undeniable, a more profound question lingers beneath the surface: What is the ‘new normal’ in a post-pandemic world, and what does it mean for investors?

Lori Calvasina, a leading strategist at RBC Capital Markets, highlights a crucial sentiment among investors: the post-COVID era is not a mere echo of past economic cycles. This realization, Calvasina argues, is “keeping many of them calm” amidst the daily noise of interest rate debates and Fed policy predictions.

While the day-to-day market commentary fixates on short-term Fed actions, astute investors are tuning into a different frequency. They’re not just asking “what will the Fed do next?” They want to know what the long-term economic landscape will look like. The destination matters more than the journey, this time.

This post-pandemic landscape, as Calvasina’s conversations reveal, is characterized by a unique trade-off: higher inflation, but also higher interest rates, potentially leading to a healthier economic foundation than the post-2008 financial crisis era.

This trade-off may not be as appealing to consumers grappling with rising prices. However, for investors, it presents a more stable and predictable environment for long-term growth.

It’s easy to get swept up in the AI frenzy or the political drama that inevitably unfolds in the months ahead. Both are undeniably important factors for investors. Yet, these questions are, in a sense, evergreen. Technological innovation has always reshaped industries, and politics has always been an inherent risk in investing.

The post-pandemic new normal, however, presents a more fundamental question for investors: What is the true cost of capital, and what kind of returns are needed to justify further investment?

Re-evaluate valuations: Companies with strong pricing power and the ability to navigate higher interest rate environments may be better positioned for long-term success.
Diversify beyond Big Tech: While AI is a powerful force, diversifying your portfolio into sectors less reliant on technological innovation can provide stability.
Focus on fundamentals: Look for companies with solid balance sheets, strong cash flows, and sustainable business models.
Consider the long-term: While short-term volatility is inevitable, the post-pandemic new normal will ultimately be defined by long-term trends.

Key Takeaways

The post-pandemic ‘new normal’ is a complex and evolving landscape. However, by understanding its unique characteristics and focusing on the long-term, investors can position themselves for success in this new era. Don’t let the allure of AI or the noise of political headlines distract you from the fundamental questions that will define the future of investing.

Remember: The post-pandemic era is not just a continuation of the past. It’s a new chapter with its own set of rules, challenges, and opportunities.