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26 February 2026

Home / White Papers 2021

The pandemic accelerant: turbo-charging the digital economy

  • New business formation has soared during the pandemic, even though it typically plummets during recessions. Similarly, we have witnessed a record number of unicorn births, especially in FinTech and Biotech.
  • There are two primary reasons for the boom in start-ups and unicorns: the broad availability of financing, and the vastly improved digital ecosystem which has drastically lowered the upfront costs of starting a business.
  • Regardless of recent progress, it is estimated the U.S. has only reached 18% of its digital potential, suggesting this shift in the structure of the economy is just getting started.
  • Further, COVID-19 has primed the U.S. for another period of rapid productivity growth, driven by the swift adoption of digital technologies and an economy running at full steam.
  • However, the stunning pace of digital innovation raises challenges for national accounts, which we believe understate economic and productivity growth by a full percentage point per year, while overstating inflation by a similar amount.
  • Digitization is also profoundly disinflationary, which implies “lower for even longer” interest rates. This is especially beneficial for long-duration equities and the latest crop of unicorns.
  • While pockets of speculative excess undoubtedly exist, tech and the overall S&P 500 appear fairly valued, provided they continue to produce solid free cash flow (FCF) growth and bond yields remain subdued.
  • We expect digital platforms to represent the vast majority of equity market capitalization by 2025, with tech, health care, and communications the most promising sectors.

Download the full paper here

Part 1 of this series, The Pandemic Accelerant: Digital Age Business Strategies, can be accessed here.

 

  •   21 October 2021
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