Right now could look like a scary time to invest in stocks: The economy is in recession, the market is volatile and a tumultuous presidential election is underway. Not to mention the global pandemic is still raging, and the nation is bracing for a possible second COVID-19 wave and potentially deadly winter. Why risk dumping any of your hard-earned cash in a rocky market when you could stow it safely away in a high-yield savings account? The answer, to put it simply, is because without taking the risk for loss you have no opportunity to realize a gain.
It’s also important to tap into a big-picture perspective: Yes, things are bad, and yes, the future is uncertain as it always is — but the stock market has an impeccable knack for rebounding and self-correcting. In fact, it’s rebounded already since its epic nosedive in March. Additionally, JPMorgan Chase forecasted that the S&P 500 will rise to between 3,500 and 3,600 points by the end of 2020, and rise again to 3,750 by September 2021. It recommends that investors consider adding cyclicality within sectors currently seeing “structural growth,” such as healthcare innovation and environmentally driven trends, CNBC reported on Sept. 29.
So, rather than succumbing to the panic of the moment, it’s best to keep calm and continue investing. That said, you do need to be especially vigilant, as not all stocks are safe bets in economic upheaval. And during hard times, it might be better to choose a recession-proof investment.
Last updated: Oct. 2, 2020
Uber is the darling of the gig economy, but the company could stall out during a recession. In its S-1 filing, Uber cited an economic downturn in the metropolitan areas it thrives in as a factor that would adversely affect its businesses. What’s more, Uber was barely operating during the lockdowns. The company also stated regulatory obstacles as an inhibiting factor. This is prescient when you consider all its regulatory woes of late.
Molson Coors, which owns Coors, Miller and other brands, has had structural problems for some time now, and that’s never a good sign when investing during a recession. The coronavirus pandemic hasn’t done the business any favors. Molson Coors had shares down over 25% through mid-August — all while the broader market saw a 4% boost, The Motley Fool reported.
Photo: Miller Lite is one of Molson Coors’ brands.
Like Uber, Lyft said that an economic downturn would be an adverse factor in its S-1 filing. Intriguingly, the company went on to say that a public health crisis would also be bad for business.
Although Apple stock has done fairly well during this pandemic, it could be an unsafe bet during a recession in part because financially strapped consumers will be unwilling or unable to dish out cash for its luxury laptops and smartphones. Additionally, as Apple has deep ties in China — an area affected both by COVID-19 and by its trade war with the U.S. — there still could be problems ahead.
Ford Motor Company
Ford has long been deemed a risky buy during a recession, if only because its dependency on the U.S. economy runs so deep. Cars also are considered “discretionary goods,” aka nonessentials — which is exactly what consumers aren’t buying during a recession, especially not during this pandemic where the word “essential” is being pounded into people’s brains from all directions.
Now, just because old-school automaker Ford isn’t a safe bet doesn’t mean that Tesla — with its slick electric vehicles and its ambitious promise to make its cars less than $25,000 in the near future — is a win, either. The problem with Tesla, as Bernstein analyst Toni Sacconaghi pointed out in July, is that it’s expensive. If the company misfires in any way, it could face great financial loss.
In past recessions, the stock performance of vaccine companies might not have been a major point of interest among financial advisors, but this pandemic has changed all that — and now vaccine companies are all the rage. A frontrunner to produce a COVID-19 vaccine, Moderna has become a coveted stock — but even if successful with the vaccine, how exactly you monetize one during a public health crisis remains a question. Additionally, Moderna is a biotechnology company, an inherently risky sector when it comes to the stock market.
In an article run by Nasdaq in October 2018, The Motley Fool considered whether American Airlines would be a bad bet in a recession and concluded that its high debt load made it poorly positioned for an economic downturn. Now, during a recession in which the travel industry has been dealt an unbearable blow, American Airlines is looking sorrier than ever.
How many of you bought General Mills products during quarantine? Probably quite a few — and the proof is in General Mills’ astronomical performance. For the first quarter ending Aug. 30, the company reported a net sales increase of 9% to $4.4 billion.
The spike was driven by consumers stocking up to ride out the pandemic lockdowns, but can it keep going up? The trade wars combined with high unemployment and the company’s fraught history with debt suggest maybe not.
Navistar International was often seen as a losing buy in a recession well before COVID-19 struck, but the pandemic only worsened matters for the trucking giant. “Navistar is not immune to the reality of the COVID-19 pandemic,” Troy A. Clarke, chairman, president and CEO, said in a statement in April. “The extent of this virus is unprecedented, and our personal lives, businesses and global economies are being impacted by events beyond our control.”
US Steel Corp.
Like the trucking sector, the steel industry has long been eyed as a problematic investment in a recession because its performance hinges so heavily on that of the auto industry. The company has had some tough tumbles on the market this year, and long-term investors might want to look elsewhere when expanding their portfolio.
GoPro has long been considered a risky buy during a recession because of its history of high channel inventory, but the bigger worry today is the company’s downward trajectory on the stock market between 2014 and 2020.
Like Tesla, the cloud data company Snowflake is an expensive stock — and with impressive growth, it’s earned its lofty price tag. But sometimes the hype can be a little overstated, and part of a savvy investment strategy is not overspending. Perhaps the smarter move would be to buy a handful of stocks in the cloud computing sector as the industry, in general, is positioned for more growth.
Part of the reason why Whiting Petroleum has been seen as a bad investment in past recessions is right there in its name: petroleum. As climate change intensifies, companies have pledged to phase out petroleum and other fossil fuels. On April 1, the Denver-based oil company filed for Chapter 11 bankruptcy and has since restructured, but crude oil is still a bad bet for investors during an economic downturn.
Host Hotels & Resorts
Host Hotels & Resorts shares saw an average stock drop of 38.2% over the three recessions leading up to 2019, Investors.com reported — an indication that the stock wasn’t a savvy buy amid economic instability. And the COVID-19 recession isn’t going easy on the real estate investment trust.
On Sept. 15, the company provided an update on its hotel operations and suggested rocky waters ahead. It stated that it expects to incur $60 million to $70 million of severance expenses in the second half of 2020 alone, due to its hotel operators making staff cuts.
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