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Investments and the Stock Market During COVID-19: Unexpected Winners & Losers

The stock market is no fan of change and uncertainty. Since its inception, the market has had its share of losses and gains, peaks and valleys, bears and bulls, even ascending and descending triangles. To investors and traders alike, these ongoing and occasionally unforeseen fluctuations are a given.

But last year, on July 29, the MSCI World Index went down by more than five per cent, while we had been rolling out of the first wave, unaware of the forthcoming waves.

Whether you call it a domino or a snowball effect, the impact COVID-19 had on our lives — and ultimately, the market — proved to be powerful and all-encompassing.

Winning and Losing in the Time of COVID-19

WINNERS

If luck is a cruel mistress, then COVID-19 is her evil stepsister.

At the beginning of the pandemic roulette, some of the biggest winners included Amazon, Netflix, Peloton, Etsy, and Zoom.

Other big winners were:

Pfizer-BioNTech and Moderna – Most of us labelled Pfizer as the makers of “that little blue pill,” with many of us completely unaware of its German partner BioNTech, or of Moderna. All of that changed when vaccines began to roll out.

Grocery Stores and Household Goods – North American consumers began spending more on goods (especially toilet paper) than they ever had before.

Of course, the biggest winner in the COVID-19 sweepstakes was technology. Not only did it afford many of us the flexibility of working from home, but imagine if we hadn’t had social media, mobile phones, online shopping, online entertainment, and virtual meetings.Technology allowed us to be apart and still remain together.

LOSERS

Crowded transit options and sports venues got abandoned. Grabbing a bite with friends or simply getting a haircut became non-existent, seemingly overnight.  

Basically, any business providing goods and/or services that could only be bought or consumed outside of homes fell into the “loss” category.

Small Businesses/Food Service Industries – Forced to miss out on the opportunity for making summertime dollars, these small businesses had to sink money they barely had into making their establishments safe for the public—only to be closed again soon after. The second shutdown only compounded the problem, since many had then been shut out of most holiday revenue.  Many businesses had to close — some having been family-owned for generations.

Large Businesses did not go unscathed. The pandemic forced such iconic names as J. Crew, Reitmans,  and Chuck E. Cheese into bankruptcy.

Some of the hardest hit industries were those in the so-called BEACH stocks: booking, entertainment and live events, airlines, cruises and casinos, hotels and resorts.

Carnival Cruises, for example, reported losses of $2.9 billion in Q3 — roughly $287 per second.  In an attempt to stay above rough financial waters, they removed 18 ships from their fleet.

Travel is closely linked with the oil industry, with transportation accounting for over 60 per cent of the global demand. The drastic drop in gasoline and jet fuel consumption was reflected in the market and at the gas pumps. Many smaller energy firms that trade in the stock market were down by well over 50 per cent.

And then there was the matter of the Canada-U.S. border, with Canada closed-off from its chief trading partner to all non-essential travel for the better part of the year.

DRAWS

Ironically, one of the few entities able to lay claim to both the winning and losing categories was the Canadian government.

From the winning perspective, their approval rating skyrocketed — they were celebrated for acting quickly in response to the COVID-19 pandemic, as well as on their long list of assistance programs.

Perhaps the biggest negative has been the now-massive deficit. What had been a deficit of $1.6 billion for the 2019–2020 fiscal year ballooned to $148.6 billion during the first four months of the 2020–2021 fiscal year.

Hope Springs Eternal

However, 2020 wasn’t all gloom and doom.

November’s announcement that COVID-19 vaccines had proved to be effective was a much- needed shot in the arm (pun only partially intended) to the stock market, as well as an exhausted public that finally began to see the light at the end of the tunnel.

On November 17, 2020, the Dow Jones Industrial Average stock index had closed at 29,783 points. A week later, President Donald Trump proudly declared that the index had surpassed the 30,000-point mark.  In his words, “a sacred number” — sort of a financial four-minute mile.

Patrick Spencer, the vice-chair of equities at the investment bank Baird, then declared that the Dow had the potential to climb to the 40,000-point summit by the year 2021. For him, the index’s propensity to grow by 2021 outweighed the expected rise in growth stocks.

Scott Blair, Chief Investment Officer of CWB Wealth Management, suggested, “The best protection from the unexpected is to build diversified portfolios of quality firms, trading at reasonable valuations. This helps protect capital in rocky markets and ensures a strong upside when the markets are calmer.”

By the end of 2020, some of COVID-19’s biggest winners had become some of its biggest losers, and vice versa. Dramatic rebounds had been witnessed even by the BEACH stocks.

A Snake in That Greener Grass

To quote an age-old expression, spring has sprung, the grass is riz, and we will soon wonder where the COVID-19 is.     

Seasonal effects are predictable patterns, but no one could have predicted the past year’s patterns nor the lasting impact upon the entire globe. COVID-19 made last year the best of times and the worst of times… the darker side having a stark edge over the brighter side.

They say to hope for the best but prepare for the worst. If 2020 taught us anything — financially or otherwise — it would be, expect the unexpected.

Peter Campbell | Contributing Writer

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