The pandemic is still clearly a force for investors to grapple with. Worries that the resurgence of the coronavirus could force countries to limit or reverse their lockdown-easing measures saw European and US stocks wobble in recent weeks. This summer has seen an alarming number of Covid-19 cases in the US, Brazil, Russia and India.
All the same though, the hope is that the world is now in a better place - and that it understands more about the virus - than it did in the early months of 2020. So as many countries slowly emerge from lockdown restrictions - and hopefully put the worst of the pandemic behind them, how might investors play the stock markets?
The upbeat investor
Stock market investors need to differentiate between the companies which will survive the Covid-19 economic fallout - and the ones which won't, advised Peter Brown, co-founder of Baggot Investment Partners. "The onus is on investors to look at investments and ask if they have a future," said Brown.
Some of the shares which have been hit hardest by the pandemic could prove to be good opportunities - as long as the shares are in companies which survive.
"There are a number of companies whose share prices are still heavily depressed but who will survive the Covid pandemic," said Brian O'Reilly, head of investments with Mediolanum Asset Management. "Companies such as Siemens and General Electric have obviously seen their share prices hit hard as economies went into lockdown and economic activity ground to a halt."
Another company O'Reilly suggested as a possible investment opportunity is AB Inbev - the Belgian beer company which makes Budweiser and a range of other brands of beer. That company's share prices has fallen sharply since the coronavirus crisis started.
The shares of European and Irish banks, such as AIB, could also gain ground as economic recovery sets in (if it does) and prove good investment opportunities as a result, according to O'Reilly. So too could CRH and other businesses likely to benefit from big government contracts to build roads, schools and so on, he added. "I expect to see governments around the world invest heavily in infrastructure after Covid," said O'Reilly.
Of course, any prolonged recession following the pandemic is likely to make it harder for embattled companies - and their shares - to recover. For optimistic investors who expect a vaccine to be developed and economic recovery to kick in, O'Reilly recommends a 'barbell' approach. "With the barbell approach [in the context of Covid], investors would keep investments in the companies and industries that are least impacted by Covid and have actually gained market share due to the lockdown restrictions - such as technology and companies like Microsoft and Amazon," said O'Reilly.
"However, investors would also gradually start adding positions for the day when a vaccine will be found and our lives return to normal. In that regard, the other side of the barbell can focus on industries which have seen their share prices hit the most [but which will still survive]."
Such investors however need to be prepared to weather some more stock market volatility.
"Covid-19 has not gone away and until a vaccine is developed, stock markets will stay volatile," said O'Reilly. "Most experts agree that the earliest a vaccine will be developed is by next year, but if the market believes a vaccine is being developed, it will start to price that into investments long before the vaccine is available."
Value investing - where investors seek out stocks and shares that are trading at a significant discount to their intrinsic value - would also be a good investment style to adapt ahead of a recovery, advised O'Reilly.
"What we see time and time again is that in a recovery, the parts of the stock market that were priced for failure do best once investors get more confident that the recovery is on a more stable footing," said O'Reilly. "Cyclical industries - like industrials and consumer discretionary companies - will also do well in a recovery."
As is always the case in investments, putting all of your money into one or a small number of shares is very risky. Investors should invest in shares through a well-diversified portfolio and get independent financial advice before making any major decisions.
The worried investor
For investors worried about a second wave - or indeed subsequent waves - of the virus, the best approach could be to stick with what has been performing the best in the pandemic, advised O'Reilly.
"Investors will gravitate toward those companies and industries that have the most earnings and sales stability," said O'Reilly. "Technology has been the clear winner with people shopping online and working from home - while more cyclically exposed companies have borne the brunt [of the pandemic]. Healthcare is also an area of interest given the search for a vaccine. In consumer staples, the likes of Proctor and Gamble - which manufacture everything from washing powder to toothpaste - have been relatively well insulated from the pandemic."
Gold - an investment investors often flock to when markets are nervous - is also an option for those worried about a second wave or prolonged post-Covid recession. "If investing in gold, go for a gold Exchange Traded Fund [ETF - essentially a basket of shares] or a gold mining company with low debt," said Brown.
Bear in mind though that gold may not perform as well as other investments once economic recovery sets in. "More defensive assets like gold, sovereign bonds [issued by a national government] and quality stocks [which are generally more reliable and less risky] will not keep pace with the more cyclical parts of the market that will do better in a recovery," said O'Reilly.
Regardless of whether you are an optimistic or pessimistic investor, it is very important to take a long-term approach. "Investors should ignore the noise and remember that long-term investing produces good outcomes," said Will Sparks, personal financial planner with SparksWealth. "Tinkering with your investment and trying to time the market has never worked."
'New normal' investor
It remains to be seen what long-term impact the pandemic will have on our lives. "The crisis has accelerated a number of trends that will stay with us - such as the increased use of technology in our everyday lives," said O'Reilly. "Remote working will also become more prevalent."
The growth in remote working has been good news for investors in many of the big tech companies - Microsoft's share price for example has increased by more than 40pc over the last year, despite the pandemic.
"Our dependence on big tech companies to work and live is now stronger than ever and we see this dependence manifesting itself with the continual growth of big tech," said Sparks.
A long-term move towards remote working would spell bad news for some investors though.
"I wouldn't be investing in commercial property funds," said Brown. "We've got a considerable number of businesses that won't reopen. We've got a considerable number of people who are now working from home. So commercial property could be in a lot of trouble."
There are a number of Covid-19 developments investors should watch keenly in the coming months. They include trends in Covid-19 cases, the impact of the holiday season on Covid numbers, how severe any second wave of the virus is - and how governments react to such a wave, and how the pandemic pans out in the US. "The US economy and stock market is the backbone of the global economy," said Sparks. "So how the US consumer reacts to restrictions and bounces back from the crisis is crucial."
Some believe there are a number of years of poor economic growth and high unemployment ahead. Investors should however remember that this crisis, like previous ones, should in time pass.
"There is a tendency to be overly-negative during a crisis," said Sparks. "We are so often anchored to current sentiment and information that we cannot rationally see brighter times ahead." Hopefully investors will see more bright days than gloomy ones in the coming months.
"Airlines are what the banks were in 2008," said Will Sparks of SparksWealth. "They may be required to take more State aid and look at other refinancing arrangements. At worst, many airlines might be forced to revert to their semi-state origins. None of these outcomes are positive for equity investors in these companies."
It's important to remember that while a number of banks collapsed in the 2008 financial crisis, many also survived. So while airlines have a few tough years ahead of them, a number of the stronger ones could see brighter days.
There are however big questions around the future of business travel - which came to a standstill during the pandemic. Some of the companies which paid for a lot of business travel in the past may have gone to the wall. Others who are still in business may be reluctant to pay for as much business travel as they did.
Technologies such as Zoom provided an alternative to the one-to-one meetings business executives had often travelled to - and this is likely to continue in some form going forward.
"Airlines heavily involved in business flights will be vulnerable," said Peter Brown of Baggot Investment Partners.
Tourism and travel have been rocked - as have many long-established hotels.
The share price of some cruise liner companies have taken huge hits. "There is real concern that people won't want to take cruises again," said Brian O'Reilly of Mediolanum Asset Management.
"Entertainment stocks will be hit hard," said Brown. "There's no question we will be left with a very large stub of people unemployed after this. That will be a big hit to restaurants, pubs and the entertainment industry."
HIGH STREET RETAIL
Physical retail [high street stores and shopping centres] will face challenges as long as the virus exists and some social distancing measures remain in place, according to O'Reilly.
"Even if economies open up, there are some doubts about whether people will feel confident enough to mix in public settings," he said.
High street retailers with a niche or unique offering may weather the storm.
To survive going forward, high-street retailers will have to reinvent themselves and offer something which can't be obtained through an internet browser, according to Sparks. Some shops already do this.
"Primark [which trades as Penneys in Ireland] for example offers an experience and niche that can't really be recreated online," said Sparks. "Action are a non-food supermarket on the Continent which gain consistent repeat business from bargain hunters."
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