Certain sectors of economy more resilient, better positioned to weather coronavirus crisis
By Matthew Reitz
BridgeTower Media Newswires
As the COVID-19 pandemic has shuttered businesses, disrupted markets and impacted nearly every corner of the global economy, many investors are struggling with how to approach the future and evaluate their portfolios in a time of extreme uncertainty.
The Dow Jones Industrial Average (DJIA), S&P 500 and Nasdaq Composite each reached all-time highs just two months ago in mid-February before plummeting throughout the month of March as the coronavirus spread and halted much of the world's economy. Markets have rebounded in recent weeks and uncertainty is likely to continue, but local experts caution investors to be patient and say solid long-term investments are still the key to a healthy financial future.
Certain sectors of the economy are more resilient and well-positioned to weather the coronavirus storm, experts say, while other industries could be slower to rebound when economic activity does pick back up.
Financial experts repeatedly said the travel and leisure industry is more likely to have a slow return to normalcy, while consumer staples, such as groceries and utilities are largely continuing business as usual despite the mammoth changes society has undergone in recent months.
Moving forward past the coronavirus pandemic, Charles Wade, a senior vice president and financial advisor of Rochester-based Brighton Securities, said investors have to look at investments industry-by-industry and consider life after the stay-at-home orders and health scares subside. Though much of that remains uncertain, Wade said it's likely to take much longer for the recreation and leisure industries - hotel, airline, cruise ship and event-based companies - to rebound.
"It's reasonable that it may take them longer to recover based on the fact that I don't know that we're all going to be running out to an amusement park or a concert or signing up to book a cruise in the next couple months," Wade said.
William Shaheen, president and CEO of Rochester-based investment management firm Whitney & Co., said airlines are a prime example of a vulnerable industry due to the global pandemic, noting many retail sectors are likely to be similarly slow to recover.
Brian Murphy, a vice president and senior investment strategist with Canandaigua National Bank and Trust Co., said in broad terms, larger, more well-established firms have been able to endure the economic downturn better than smaller companies. He said quality companies, regardless of size, are better positioned to move forward.
Individuals who had strong investments prior to the downswing are likely to remain in a solid position moving forward, Wade said, as many of those companies and investments will be able to weather the storm and potentially come out the other side stronger.
"If you own quality investments and act in a prudent manner when chaos is surrounding us, you're probably going to be just fine on the other side of this," Wade said.
Sectors of the economy well positioned to withstand the sluggish economy include those that produce consumer staples, Murphy said, noting those products are currently in high demand. He said technology firms, especially those with subscription-based models that people are using more than ever, also might have a bright future.
"Overall it's entirely possible that some of the trends that we were seeing play out probably over the next several years relative to technology utilization may well have been significantly accelerated because of this," Murphy said, pointing to remote work platforms, online shopping and delivery services.
Shaheen said certain health care and technology sectors could actually benefit financially from the pandemic. Technology companies that support individuals working remotely, or transitioning to life at home, and companies working toward vaccinations or cures for the virus could see their stock rise in the immediate and near future.
Much like Shaheen and Murphy, Wade said many of the technologies, such as teleconference specialists, that are being utilized more than ever as the nation's workforce has largely shifted to the working from home could be poised for a promising future. Wade also pointed out that individuals will still be paying their utility bills and shopping for groceries and other products that are needed on a day-to-day basis throughout the crisis, and a "common sense approach" to investing can be useful.
"Think about what areas are likely to see an increase in demand and I think that is a lot of very boring consumer staples - utilities and companies like that - that make or produce a product or service that people need, not necessarily that they want," Wade said.
Local financial managers say that in times of market volatility it's more important than ever to have a long-term plan and a well-balanced portfolio based on your individual financial goals.
Laurie Haelen, a senior vice president and manager of wealth solutions with Canandaigua National Bank and Trust, said it can be difficult to ignore emotions and not panic during times of economic uncertainty, especially the current unprecedented time, but historically financial decisions based on emotion do not turn out to be the best decisions.
"It's easy to get emotional about your financial situation in this type of an environment, but it's not good to make decisions based on those emotions," Haelen said. "We also tell people if their goals haven't changed they really probably don't need to do a lot to change their investments."
Haelen, however, said a market downturn can be a good time to review your overall financial plan, and there are "always silver-lining opportunities in this type of environment."
"If you have a long time horizon, rebalancing your portfolio - meaning selling bonds and buying stocks - is actually the prudent thing to do," Haelen said. "Though sometimes it's hard to get your head around that with all the volatility."
Shaheen said the best approach to investing during a market downturn is to remove emotion from the decision making process and "simply do some rebalancing," or in other words "essentially stay the course." He noted missing just the 10 best days of the market over a 20-year span can reduce your average annual return by more than half.
"We like to say time in the market is more important than trying to time the market," Shaheen said, noting the days with the largest gains often closely follow the days with the largest losses, so it makes sense to stay in the market.
Murphy pointed out that by April 10 markets had rebounded more than 25 percent from the March 23 low, and investors who made emotional decisions to sell at or near the low already missed out on a "significant rebound."
Published: Fri, Apr 24, 2020
