With recent warnings that COVID-19 won’t be going away anytime soon, is there a way for investors to start protecting themselves against a long-term shutdown?
The market rollercoaster continues with stocks jumping from green to red almost for fun, despite having closed out one of its best-ever weeks last Thursday. After falling into the fastest bear market in history, the Dow (NYSEARCA: DIA) posted its seventh-best weekly performance, rallying 12.7%, while the S&P 500 (NYSEARCA: VOO) had its biggest one-week gain since 1974, jumping 12.1%.
However, in a Saturday press release, the World Health Organization (WHO) gave a somewhat sullen report on the longevity of anti-coronavirus measures. “We think it’s going to be a virus that stalks the human race for quite a long time to come until we can all have a vaccine to protect us,” Dr. David Nabarro, a representative for the WHO, told NBC’s “Meet the Press.”
Should we be worried?
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How much economic damage will COVID-19 cause?
We need to prepare ourselves for months of closed-down businesses and isolation, and with more than 530,000 COVID-19 cases and roughly 21,000 deaths in the U.S., this will be damaging. Many analysts believe that it won’t stop until a vaccine is created by the likes of Amgen (NASDAQ: AMGN), BioNTech (NASDAQ: BNTX), or Gilead Sciences (NASDAQ: GILD).
Morgan Stanley (NYSE: MS) and Goldman Sachs (NYSE: GS) are already predicting massive GDP declines of 30% from April to June, with downturns that will dwarf the Great Recession.. However, nobody really knows exactly what the extent will be, and there are plenty of businesses that will weather this storm, and even benefit from it.
Which investments will suffer?
There is no doubt that many investors will be worried about specific industries during this downturn. Even the untouchable might of the Disney’s (NYSE: DIS) and Tesla’s (NASDAQ: TSLA) of the world look vulnerable right now, with the ‘House of Mouse’ down 14% in the past month, and Elon Musk’s electric vehicle maker falling 12%.
However, as of Tuesday morning, April 14, Tesla jumped more than 13%. It is other sectors that will suffer the hardest, such as restaurants and aviation.
Estimates put the U.S. at losing 1 in 5 restaurants due to the coronavirus. McDonald’s (NYSE: MCD) reported a 22% drop in sales in March and Starbucks (NASDAQ: SBUX) predicts its profits to be halved this year due to the virus. Overall restaurant transactions were down 42% in March, as 97% of all restaurants in the U.S. are now operating under some form of restriction.
While big stocks like McDonald’s, Starbucks, and Chipotle (NYSE: CMG) managed to invest in online services which will be to their benefit now, the likes of Texas Roadhouse (NASDAQ: TXRH) fell 38% in March due to a lack of these kinds of operations.
Another industry that has received much attention due to lay-offs and declining revenue is airlines. Delta (NYSE: DAL), Southwest (NYSE: LUV), American Airlines (NASDAQ: AAL); all of these companies have serious problems with revenue generation as flights are grounded due to the virus. Boeing (NYSE: BA) is suffering badly. As a manufacturer, demand has dropped to zero for America’s largest exporter which was already having problems due to the grounding of its 737 MAX jetliner.
A government bailout will likely protect these companies, but will not fix their short-term revenue problems. So virus or not, these are avoidable investments right now.
What businesses will thrive?
Many stocks have proven themselves to be immune to the coronavirus during this pandemic. We know all about at-home stocks such as Slack (NYSE: WORK) and Teladoc (NYSE: TDOC), that are naturally on the rise as people self-isolate.
However, there is a new DAWN on the horizon that analysts believe to be key investments due to the coronavirus:
Dominos (NYSE: DPZ): representing food-delivery stocks.
Activision-Blizzard (NASDAQ: ATVI): represents the video-gaming industry.
Walmart (NYSE: WMT): because of the bulk-buying taking place across the globe.
Netflix (NASDAQ: NFLX): because what else can you do in isolation but Netflix and chill?
These represent a growth-opportunity right now if the pandemic is prolonged, while the likes of ‘traditional’ Big Tech stocks Facebook (NASDAQ: FB), Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), Google (NASDAQ: GOOG), and Microsoft (NASDAQ: MSFT) can be seen as ‘bargain’ buys at the moment as the market drags their prices down.
How to beat the downturn
There are a couple of ways investors can beat, and even benefit from COVID-19 volatility; the first being dollar-cost averaging.
It is a great way for investors to take back a bit of control over the current market madness that has gripped Wall Street. All investors need to do is plan interval additions to their portfolio, choose the stocks they wish to invest in, and then most importantly:
Another method is by following the MyWallSt ethos of becoming a long-term investor, with a diversified portfolio made up of companies from our award-winning list of stocks.
Historically, the market has returned 10% annually since it first began, and with that in mind, this pandemic will pass, as will the recession that follows. We may be in hard times, and though it is hard to see, there is always a light at the end of the tunnel.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.