The global economy has been brought to a standstill on account of the coronavirus-induced “The Great Lockdown.” Escalating market volatility has triggered a massive uproar in the global financial market.
In the latest report titled, “World Economic Outlook, April 2020: Chapter 1 The Great Lockdown,” the International Monetary Fund (IMF), stated that the global economy is anticipated to decline “sharply” by 3% in 2020, which is significantly severe than the 2008–09 financial crisis.
The IMF report estimates “cumulative loss to global GDP over 2020 and 2021” from the coronavirus crisis to be near $9 trillion.
The report anticipates that “The Great Lockdown” crisis can trigger the “worst recession” since the Great Depression of 1930s, in 2020 and surpass the severity of the 2008-2009 global financial crisis.
Lockdowns Batter Demand & Impact Spending Patterns
Coronavirus crisis has taken away the basic “socialness” attribute that defines the basic nature of human beings. It has transformed the way we interact with each other.
Widespread lockdowns have led to cancellation of community gatherings, major sports events, conferences, and travel plans, compelling us to stay within the confines of our home. In some parts of the world, a second wave of coronavirus outbreak has kept governments vigilant and is preventing them from withdrawing the lockdown earlier.
Some are of the opinion that even a third wave is plausible. This is likely to transform human behavior and social distancing is anticipated to continue going ahead.
This brings us to the conclusion that, people will tend to avoid unnecessary travel plans, and will remain cautious of social activities such as visiting public places, organize huge gatherings, eating out, to mention a few.
The recession seems to be inevitable as all these factors have been impacting economic activities and spending patterns across the globe. Layoffs and pay-cuts have become the norm for quite some time now.
Markedly, Germany recently announced that the country entered a recession in March and the slowdown is expected to continue until the middle of 2020.
How to Invest in the Trying Times of a Global Recession?
Contrary to popular belief, there are stocks that do well during economic downturns.
Another point worth noting, is that coronavirus crisis-induced economic downturn has bolstered demand across various domains, beyond the traditional utilities and consumer staple sectors.
Work-from-home and stay-at-home is likely to be the trend for quite some time and bodes well for the stocks involved in relevant business verticals, owing to adoption of digital transformation solutions and enhancements to network infrastructure.
Virtual events, digital healthcare services, and use of online platforms for conferences, education, shopping, is expected to gain steam in the days ahead. Moreover, economic revival initiatives from governments across the world are expected to aid the global economy to rebound from the pandemic-led downturn.
Governments are striving to normalize economic activity and deal with the supply-chain issues, by opening manufacturing processes, and ensuring safety measures.
Further, the IMF report states that global economy is likely to rebound in 2021 by 5.8% assuming that “the pandemic fades in the second half of 2020 and containment efforts can be gradually unwound.”
Buy These 6 Recession-Resistant Stocks Now
We have selected six stocks with solid fundamentals to aid investors sail through these testing times. Moreover, the stocks currently flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy), which presents good investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.
Further, the stocks have outperformed S&P 500 index on a year-to-date basis.
Year-to-Date Price Performance
Cardinal Health, Inc. CAH is expected to gain from strength in Pharmaceutical segment driven by growth in Pharmaceutical Distribution and Specialty Solutions customers. Apart from these, the company’s extension of agreements with CVS Health, collaboration with PANTHERx Specialty Pharmacy and buyout of mscripts instill optimism.
Enphase Energy, Inc. ENPH enjoys a strong position as a leading manufacturer of microinverter in the United States. Enphase revolutionized the solar industry by pioneering a semiconductor-based microinverter. The company is well poised to capture larger share of the expanding solar market and improve customer reliability, backed by constant innovation in versions of its family of microinverters.
Notably, both Cardinal Health and Enphase Energy currently flaunt a Zacks Rank #1, while the remaining stocks carry a Zacks Rank #2.
LogMeIn, Inc. LOGM is poised to benefit from rising demand for offsite working as rising incidences of coronavirus worldwide has led several organizations to allow their employees to work from home. Improvement in product quality and performance, multiple product launches and increasing marketing efforts in support of the company’s new GoTo brand is a positive. The newly launched GoToConnect and GoToRoom products hold promise. The expansion of its product portfolio through acquisitions and rising sales initiatives are expected to accelerate growth in major markets, namely UCC, IDaaS and Digital Engagement.
Netflix, Inc. NFLX is expected to benefit from an expanding content portfolio despite increasing competition from the likes of HBO, Amazon prime video, Disney+ and Apple TV+. Expanding bundle offerings through partnerships with Telefonica, KDDI, AT&T, Comcast, DISH, Verizon, Charter, Altice, T-Mobile and Sky are a key catalyst. Moreover, the launch of low-priced mobile plans in India, Indonesia, Malaysia, Philippines and Thailand is expected to expand subscriber base in the Asia Pacific.
Amgen Inc. AMGN is poised to benefit from strong biosimilars portfolio. Further, growth products like Prolia, Evenity, Repatha, Aimovig, Otezla and biosimilars are expected to drive sales in 2020. It is also progressing with its pipeline while regularly pursuing “external opportunities” such as the acquisition of Otezla and the recently acquired stake in China's BeiGene. Amgen also expects several important clinical data readouts from its innovative pipeline in 2020, which bodes well.
Costco Wholesale Corporation COST is expected to gain from growth strategies, better price management, sturdy comps performance and strong membership trends. We believe that the company’s business model and commitment toward opening membership warehouses will continue to drive traffic. Moreover, with the wave of digital transformation, Costco is rapidly adopting the omni-channel mantra to provide a seamless shopping experience, whether online or in-stores. Such concerted efforts have been favoring comps. Comps grew 9.6%, while sales improved 11.7% in the month of March on the back of coronavirus-induced panic buying as consumers stock up essential items.
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