No one knows precisely when the COVID-19 pandemic will end. Most experts are hopeful COVID-19 restrictions will end and life will begin returning to normal in the middle of 2021, coinciding with the widespread distribution of an effective vaccine.
Q3 2020 hedge fund letters, conferences and more
Nobody knows what the recovery will look like once COVID-19 and its associated restrictions lift, but it will benefit you to pay attention to that shape. As more and more experts feel they can accurately predict the recovery’s shape, it will give us a better idea of the smartest investment strategy. Here are some economic recovery stages to keep an eye on:
- A V-shaped recovery, where the economy recovers immediately and vigorously (likely already passed).
- A U-shaped recovery, where the economy is stagnant for a while, then recovers fully.
- A W-shaped recovery, where the economy experiences a false upswing, followed by a V-shaped or U-shaped trajectory.
- A K-shaped recovery, where some sectors and individuals experience a V, while others continue an elongated downswing.
- An L-shaped depression, with no clear sense of the economy recovering any time soon.
The 8 Sectors To Watch When COVID-19 Restrictions Lift
That said, the return to everyday life will have a profound impact on the economy and stock prices. Savvy investors will watch the sectors most likely to recover quickly or that have taken the biggest hits during this unprecedented shutdown. Here are 8 sectors that you should pay close attention to after COVID-19 restrictions are lifted.
1. Advertising
When the economy shut down in March and April 2020, businesses felt the pinch. Many of those that survived did so by trimming advertising budgets substantially. This rolled uphill into the advertising industry, causing a drop in stocks for large advertising and marketing firms.
None of the publicly traded advertising players are likely to fail before things return to normal. Once they do return to normal, surviving businesses will ramp up their advertising spend quickly. They all know the first to hit the reopened market in a big way will enjoy years of advantage. Expect the advertising sector to expand rapidly alongside those big advertising spends.
Keep an eye on:
- WPP plc (NYSE: WPP)
- Omnicon Group Inc. (NYSE: OMC)
- Interpublic Group (NYSE: IPG)
2. Business services
What we just said about advertising applies to a host of other business-to-business services. Headhunters, accountants, lawyers, human resources consultants, even janitorial service providers suffered losses as companies either closed or scaled back on expenses to weather the COVID storm.
This sector will likely see an upswing more slowly than advertising. Still, you should see this rise rapidly once it begins to recover.
Keep an eye on:
- ABM Industries (NYSE: ABM)
- The Adecco Group (NYSE: ADO)
- TriNet Group (NYSE: TNET)
3. Airlines
There’s no doubt airlines are in financial trouble along with the rest of the travel industry. However, unlike independently owned hotels, local tour companies, and similar smaller travel businesses, airlines get lots of federal support. They’re not going to fail, so their stocks — however low they plummet during the emergency will not become worthless.
The good news is COVID-19 will eventually become controlled, like polio and whooping cough before it. People will travel again. The world will once again want to fly, and when it does, the publicly traded airlines will see rapid gains.
Keep an eye on:
- Southwest Airlines Co. (NYSE: LUV)
- U.S. Global Jets ETF (NYSE: JETS)
- Delta Air Lines Inc. (NYSE: DAL)
4. Fine dining
According to the National Restaurant Association, more than 100,000 American restaurants have closed since the lockdowns began, owing to an overall loss of $165 billion in revenue between March and July 2020 alone. It’s been a bloodbath for small and medium-sized restaurants worldwide. You won’t see us suggesting investments in a local eatery any time soon.
However, restaurant chains with publicly traded stock are likely to survive. They also suffered stock drops along with the restaurants that didn’t survive, but they have the deep pockets to operate for a year or more at a loss. Once COVID-19 restrictions lift, people will be eager to enjoy a meal out again. They will flock to surviving restaurants, including these big operators.
Keep an eye on:
- BJ’s Restaurants (NYSE: BJRI)
- Dave & Buster’s Entertainment (NYSE: PLAY)
- Darden’s Restaurants (NYSE: DRI)
5. Ridesharing
Uber and Lyft have taken massive hits during COVID-19 because when people stop traveling, they stop needing rideshare services. Both of these companies suffered, and both will see a resurgence as travel recommences.
The main difference between the two is Uber has enjoyed less devaluation because of Uber Eats. Meal delivery services like Uber Eats, DoorDash, and Grubhub all experienced record-breaking income and growth as people stopped eating out due to the lockdowns. Lyft does not have that ancillary meal delivery service and suffered the most. That means it stands to enjoy the most aggressive upswing when things return to normal.
While you’re at it, consider other mass transit stocks:
- Siemens AG (NYSE: SI)
- Timken Co. (NYSE: TKR)
- Harsco Corp. (NYSE: HSC)
6. Outdoor recreation
At first, we thought we would see a rise in value for these stocks last summer. People weren’t going to Disneyland or Europe, so most experts thought they would go camping instead. The market did see an uptick for this exact reason, but stocks across the board remained low.
The current estimate is the summer of 2021 when COVID-19 restrictions have lifted but families are recovering financially from the pandemic’s damage. They won’t have the money for a big vacation but should be able to afford local camping, a group road trip, or a weekend at the lake. Anybody involved in selling what people need for this kind of vacation will see soaring stock prices as a result.
Keep an eye on:
- Dick’s Sporting Goods (NYSE: DKS)
- YETI Holdings (NYSE: YETI)
- Winnebago Industries (NYSE: WGO)
7. Party suppliers
As we enter November with no end in sight — and, in fact, multiple sharp spikes in local COVID hotspots — many families are facing the prospect of not celebrating Thanksgiving, Christmas, or New Year’s Eve with anybody outside their homes. That comes at the end of a year without birthday parties, graduation gatherings, baby showers, or large weddings.
When COVID-19 passes, we’ll see parties everywhere: make-up parties to celebrate what should have been celebrated in 2020, parties to celebrate the end of the pandemic, and all the parties 2020 would typically have enjoyed. Somebody has to provide the venues, paper plates, invitations, and everything else for those shindigs. Those somebodies will see their stock value jump.
Keep an eye on:
- Party City Holdco Inc. (NYSE: PRTY)
- US Foods Holding Corp. (NYSE: USFD)
- Comvita Ltd (NYSE: CVT)
8. Sports
You’ll see sports-related stocks jump across three different industries. First, any publicly traded sports team is likely to see their best ticket sales in a decade. People missed last season and will be eager to fill the stadiums once again. Second, sports equipment companies will see a surge in sales as recreational, school, and professional teams resume practice and competition.
The third industry is less savory but reliably profitable: Sports betting companies will see more betting as more games and events take place. Their performance will improve as a result.
