The rapid onset of COVID-19 sparked a large divergence in relative performance for industries perceived as safest-from or most-exposed-to the impact of the virus. Media coverage during the onset of the crisis followed a similar divergence in tone as industries such as airlines, hotels, and restaurants suffered from largely negative reporting. As the crisis evolved and re-opening plans became clearer, media shifted its reporting in anticipation of a swift recovery. It would be tempting for reporters to lump industries together based on exposure to COVID (which we will do as a baseline analysis), but the reality is the recovery will shape up differently for each impacted industry. In this article we analyze how well media coverage has aligned with other data tracking the recovery in the industries and companies most impacted by the coronavirus.
Media Coverage of Pro-COVID and Anti-COVID Industries
To analyze the evolution of media coverage through the pandemic, we group industries into two baskets: those that are likely to see their services or products used more due to COVID-19 (pro-COVID) and those that are not (anti-COVID). In other words, we classified industries based on how investors might value them through a pandemic.
Anti-COVID and Pro-COVID Industry Baskets
|Road and Rail
||Health Care Equipment & Supplies
||Health Care Providers & Services
|Hotels, Restaurants, & Leisure
||Interactive Media & Services
||Internet & Direct Marketing Retail
Source: State Street Associates, MKT MediaStats
We provide a view into how the media is covering pro- and anti-COVID industries at any point in time by market cap weighting the media sentiment scores of each basket’s constituent companies. In the chart below, we show the spread of pro-COVID and anti-COVID media sentiment against the number of confirmed cases in the U.S. As one would expect, we see increased positive media coverage of pro-COVID industries respective of anti-COVID industries in mid-March as the number of U.S. cases spike. However, by April the number of new cases begins to plateau and pro-COVID industries see an uptick in positive media coverage relative to anti-COVID industries. This is at least in part driven by optimism from media around how the decline in new cases could lead to a rebound of industries negatively impacted by COVID-19.
This leads us to the question—did the reporting get caught up in the hype of a recovery? Or has media been more selective in its tone when discussing companies with a long road to normalcy?
Source: State Street Associates, MKT MediaStats (as of June 26, 2020), New York Times
Does Data Support the Enthusiasm?
Analysts are turning to a broad spectrum of high-frequency datasets to track the recovery in the U.S. and around the world. In this data, we are already seeing a large spread materialize in the speed of recovery for different sectors. According to data from Opportunity Insights, spending on apparel dropped around 50% (relative to January 2020) following the March 13 National Emergency Declaration. However, in more-recent readings, this number has recovered back up to only a 13% drop (as of June 10, 2020). Contrast that with Entertainment and Recreation, which fell to lows of -75%, but is still hovering below the -50% mark. According to STR, hotel occupancy rates are still down roughly 50% compared to the average for this time of year over the past two decades (and still well below 2009). The number of seated diners at restaurants is down over 60% year over year according to OpenTable. And according to data from the Transportation Security Administration, passenger travel for June is 83% below 2019 levels (as of June 16, 2020).
Media sentiment appears to have been equally enthusiastic in embracing the recovery in most of our anti-COVID industries, at least on the surface. Aggregated sentiment for industries such as Road and Rail is similar to Hotels, Restaurants, and Leisure (HRL), two industries where the underlying data is still a long way from parity. In the figures below, we cross-sectionally percentile rank a 14-day moving average of the market cap-weighted industry sentiment scores.
Source: State Street Associates, MKT MediaStats (as of June 25, 2020), OpenTable
But, as always, the devil is in the details. If we look more closely at the companies driving the positive sentiment of the anti-COVID basket, we see that many of them specialize in product lines that should be among the first wave experiencing a return to normalcy. We see high scores for CSX Corp, a large rail shipping company, Uber, which should see increased activity as people continue to avoid public transit, and Vista Outdoor, a seller of outdoor equipment for easily social-distanced activities.
In HRL, McDonald’s and other fast-food joints are experiencing positive coverage, although Marriott International shows the highest sentiment in the industry. This is a bit surprising, especially given the recent uptick in cases which have put the recovery of personal and business travel on shaky ground.
Anti-COVID Companies with the Highest Sentiment Scores
|Hotels, Restaurants, & Leisure
||Marriott International Inc.
|Road and Rail
||Uber Technologies Inc.
||Vista Outdoor Inc.
|Hotels, Restaurants, & Leisure
|Road and Rail
Source: State Street Associates, MKT MediaStats (as of June 25, 2020)
Propped up Airlines Losing Altitude
Unlike most industries in the anti-COVID basket, which have experienced a continued uptick in positive media coverage as cases declined, Airlines are being covered by the media with a healthy dose of skepticism. In early April, after investors pummeled the industry—driving it down approximately 31% relative to the S&P 500—the Trump administration announced a $25 billion bailout for the industry in the form of grants and loans. Media covered this development positively while at the same time investors took some comfort in government support. However, the narrative has recently changed with Airlines ranking near the bottom of all industries in terms of media sentiment. As mentioned earlier, this is consistent with the underlying data showing a very slow increase in the number of travelers returning to the skies.
Source: State Street Associates, MKT MediaStats (as of June 25, 2020), Transportation Security Administration
A Mixed Bag for Retail
As media has seemingly taken an enthusiastic approach to the recovery companies in the HRL industry such as McDonald’s and a more pessimistic view when it comes to air travel, media coverage for retail has been a bit more mixed. Both Specialty and Multiline retail are certainly covered with more skepticism than HRL, but it is interesting to note how the media parses the two industries. Specialty Retail is at the bottom quartile of media coverage for all industries while Multiline Retail remains above the median. One potential driver is how spending patterns among different types of consumers have returned at different rates. Low-income spending is almost back to January 2020 levels at -3%, while high-income spending has lagged at -14%.
Source: State Street Associates, MKT MediaStats (as of June 25, 2020), Affinity Solutions
This is clear in the companies that are driving the sentiment scores. In Multiline Retail, companies such as Dollar General, Kohls, and Macy’s are driving positive sentiment. A similar trend holds in Specialty Retail with inexpensive retailers such as Gap, TJX, and Rent-A-Center showing the highest sentiment, while high-end retailer Tiffany's and used-car dealer CarMax drag the overall industry sentiment down.
During every recessionary cycle, market participants go about trying to forecast the shape of the recovery. Will this be a V? A W? A hockey stick? This guy: ¯\_(ツ)_/¯? The COVID-19 recession is currently on its way to being some combination of shapes that will vary by industry and company.
From an industry perspective, media sentiment has largely tracked the initial descent and subsequent early stages of the recovery. Now, with the recovery in mid-swing, we can see that there is significant nuance in the way media is covering individual companies: speaking highly of those showing they can operate in a world where social-distancing is the norm for some time to come, and negatively of peers reliant on close-contact consumption. It will be interesting to watch how this tone evolves with the recent uptick in cases and the threat of a potential second wave of the virus.
Travis Whitmore, AVP, Quantitative Research, State Street Associates, also contributed to this article.
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