Daily Update: May 12, 2021

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Prior to the pandemic, discourse about the future of work focused on technological adoption and automation. Now, much of the effort to reimagine a new normal coming out of the COVID-19 crisis is about prioritizing people and the employee experience, where technology is a key tool to achieving adaptive ways of working. Many market participants are finding that real connections are more valuable than real estate.

New research from S&P Global finds that a hybrid model of working remotely and at a company’s office allows employees to safely return to the workplace by minimizing office occupancy while maximizing collaboration and in-person interactions.

Simulating work schedules where employees came to the office three days a week, which accounted for 65% capacity, the study found that efficiently scheduling highly collaborative teams’ in-person time together achieved an approximate 50% improvement in the daily average number of interactions each person had with the people they communicated with most. This was compared to randomly scheduling who worked simultaneously at the office, and marks an 80%-90% improvement in on-site, in-person interactions from pre-pandemic conditions when everyone was at the office.

While many industries, from banking to insurance and beyond, are eager to bring their employees back to the office full time as vaccination rates increase, the pandemic’s changes to populations’ behavior in the past year will have prolonged and perhaps permanent effects on personal and professional lifestyles. As a result, remote working will largely continue—and offices aren’t going to disappear.

“Work has become a thing, not a place. The concept of workplaces is no longer confined to physical offices but extended to online ones where people can conduct work-related tasks and develop their careers. But not all businesses and employees are alike,” S&P Global’s Hyunyoung Choi, vice president chief data scientist, Jeongwook Choi, lead data scientist, and Ada Lee, senior data scientist, said in the research released yesterday. “Our in-house data science team took a deep dive into communication patterns across the firm and developed a new approach that will explore the right balance between on-site and remote by analyzing the tradeoffs between flexibility and productivity. Our analysis has yielded a hybrid model in which employees spend some days in the office promoting collaboration through physical proximity, while giving employees the freedom to work from home based on employee needs and concerns on the public health.”

New challenges are on the horizon. The pandemic brought the inequitable digital divide between those who can learn and work from home from those who can’t into stark focus, according to S&P Global Market Intelligence. And while office landlords around the world will face higher vacancy rates, more demand for environmental quality, and greater flexibility in lease terms, S&P Global Ratings expects that key office markets worldwide will rebound to a new normal in a post-pandemic economy. Offices in Asian economies will likely experience the first starts and stops on this road to recovery.

“There is no one-size-fits-all solution to reimagining post-pandemic office space, but most employers will likely adopt a hybrid approach, with the working week split between remote working and office-based working,” maximizing the amount of square footage available in offices per person due to social distancing guidelines in a reversal of “the trend in office density that has been observed since the global financial crisis,” S&P Global Ratings said in a report on the global office reboot this week. “We believe the long-term adoption of remote working will vary by country. In that vein, Asia-Pacific's office markets could lead the recovery for the sector, given their higher office utilization and stronger fundamentals. Recovery in the U.S., Europe, and particularly Latin America will take longer.”

Today is Wednesday, May 12, 2021 and here is today’s essential intelligence.

Uncertainty in the Global Economy

Global Auto Sales Forecasts: The Recovery Gears Up

S&P Global Ratings now forecasts global auto sales will expand by 8%-10% in 2021 to 83 million-85 million units, up from 77 million in 2020. The pace of recovery is uneven regionally, with China leading, North America following, and Europe likely lagging behind. Electric vehicles (including plug-in hybrids) are set to increase in 2021 to a 6%-8% of the global share of the market, after comprising a 4.4% share in 2020 and 2.5% in 2019. The European market will drive this growth. Visibility on the semiconductor shortage crisis is still very low and hopes of a recovery in the second half of this year are fading. The impact on individual auto manufacturers varies substantially.

—Read the full report from S&P Global Ratings

Progressive's Private Auto Market Share Growth Continued Amid Pandemic

The Progressive Corp. had another strong year of growth in the U.S. private auto space in 2020, increasing its market share and written premiums. Progressive posted a 6.9% year-over-year increase in direct premiums written, the highest among the top 20 private auto insurers and the only one in the top three to book an increase, according to an S&P Global Market Intelligence analysis.

—Read the full article from S&P Global Market Intelligence

Market Dynamics

5 Mega-Cap Stocks Drag On S&P 500 As Tax Reforms, Bond Yields Pose Headwinds

The S&P 500's five biggest stocks, which pulled the large-cap index from its early pandemic trough to dizzying, record highs last year, have become a bit of a drag lately. And with corporate tax reforms and the possibility of climbing bond yields later this year, the path forward for the mega-cap stocks could be a rough one, analysts said.

—Read the full article from S&P Global Market Intelligence

Mean Reversion And Momentum

After almost four years of underperformance, we witnessed a change in fortune in February 2021, as the relative performance of the S&P 500® Equal Weight Index turned positive. By the end of April, Equal Weight had outperformed the S&P 500 by 11% over the prior 12 months.

—Read the full article S&P Dow Jones Indices

Banking Sector Under Pressure

How Much Would A Sovereign Default Cost Tunisia's Banks?

Tunisian banks' exposure to their sovereign has more than doubled over the past decade along with a sharp increase in government indebtedness. Understanding the cost of a hypothetical sovereign default for Tunisia's banks is therefore becoming increasingly relevant, especially in light of the damage that the COVID-19 pandemic has wreaked on the Tunisian economy and the ongoing political divide between the country's three branches of power.

—Read the full report from S&P Global Ratings

The Heightened Regulatory Environment: Is the Banking Sector Facing More Fines?

ax reforms, minimum wage policies, health insurance acts, and other regulations all impact business operations. It is estimated that federal regulations alone cost U.S. companies a total of $1.9 trillion annually. Litigations are also costly, averaging nearly $115 million per U.S. entity each year, and are steadily increasing.

—Read the full article from S&P Global Market Intelligence

Technolog & Media

Asia-Pacific Mobile Industry Stays Resilient Amid The COVID-19 Pandemic

A year after the start of the COVID-19 pandemic, the mobile industry in the Asia-Pacific region has remained resilient, with flat growth in mobile subscriptions and a slight dent in earnings. Prospects for recovery this year are bright, but risks from increased competition and monetizing 5G remain.

—Read the full article from S&P Global Market Intelligence

67 Markets Worldwide Have Commercial 5G Services

5G commercial rollouts accelerated in the past year despite disruptions due to the COVID-19 pandemic, reaching 158 local operators with active networks in 67 markets worldwide as of March 2021.

—Read the full article from S&P Global Market Intelligence

ESG in the Time of COVID-19

Listen: Booming Electric Vehicle Demand Spurs Mining, Metals Sector

Electric vehicle demand is expected to skyrocket worldwide, and that could require a lot more minerals than are being supplied today, experts told S&P Global Market Intelligence's "Energy Evolution" podcast.

—Listen and subscribe to Energy Evolution, a podcast from S&P Global Market Intelligence

Global Renewables Grow At Fastest Pace In 20 Years In 2020: IEA

Global renewable electricity sources grew at their fastest pace in 20 years in 2020, the International Energy Agency said in a report May 11. The annual surge in renewable energy capacity is set to become the new normal, the IEA said, after revising upwards its estimates for 2021 and 2022 by 25% from its previous forecast in November 2020.

—Read the full article from S&P Global Platts

Listen: U.S. Pipelines Wake Up To Cyberthreats After Colonial Shutdown Exposes Vulnerabilities

Will the cyberattack that forced the largest US oil pipeline to shut down for days be a wake-up call for the industry to rapidly shore up its cyber defenses? On this special episode, we have two interviews from cybersecurity experts. Both say they were not entirely surprised by the attack on the Colonial Pipeline, as they have witnessed the oil and gas sector be slower to adopt cyber security programs than counterparts in the utility sector. Leo Simonovich, global head of industrial cyber at Siemens Energy, returns to Capitol Crude after joining us last year, when he made the case that the industry's digital transformation was being accelerated by the pandemic and that it was compounding cyber risks. John Cusimano, vice president of industrial cybersecurity at aeSolutions, explains the challenges that pipeline networks face in guarding against attacks.

—Listen and subscribe to Capitol Crude, a podcast from S&P Global Platts

The Future of Energy & Commodities

Uptick In East Asia's COVID-19 Cases Puts Brakes On Gasoline Demand, Margin Recovery

Headwinds have reemerged for the Asian gasoline market, as new pockets of COVID-19 infections across East Asia heighten concerns over new wide-spread movement curbs that could derail near-term demand-side recovery of the motor fuel and put the brakes on the uptrend in the middle distillate crack spread.

—Read the full article from S&P Global Platts

OPEC Expects Higher Demand For Its Crude, Lowering Supply Forecast From Outside Bloc

OPEC's analysts kept their global oil demand outlook for the year unchanged but downgraded their projection of non-OPEC liquids supply by 230,000 b/d due to the vast U.S. well shut-ins during the winter ice storm

—Read the full article from S&P Global Platts

FERC Attempts To Add Timeline Certainty To Order On Gas Pipeline Construction Starts

The Federal Energy Regulatory Commission sought to increase certainty around the timing of construction of natural gas pipelines by adjusting its recent rule that barred developers from starting work while rehearing of commission orders was pending.

—Read the full article from S&P Global Platts

Future Of UK Gas-Fired Power Clouded By Policy, Economic Uncertainty

Since the UK's famed "dash for gas" strategy in the 1990s and another government push in the early 2010s, gas-fired power has enjoyed a good run.
—Read the full article from S&P Global Platts

Written and compiled by Molly Mintz.