The coronavirus (Covid-19) has had a massive impact on the economy. Between the stock market crashing over 30% within a month, to the massive amounts of stimulus by governments, followed by a massive gain of over 80% during the past year. Some sectors, such as the airline/travel sector, were hit the hardest, while others, such as the Technology sector, soared to all-time highs.
In this blog post, we are going to look at how the coronavirus affected each individual sector stock prices, how they recovered, and where they go from here. This will hopefully help you in your research by giving you insight into which sector provides good growth opportunities, and which ones may be in trouble.
Let’s start with a graph showing a comparison of all sectors.
When the coronavirus forced countries to go into lockdowns, companies had to adapt in order to survive. Companies faced all sorts of new problems, such as store fronts closing, being unable to fly for meetings, unable to reach their customers, ect. For the companies that had solutions to these problems, business started to boom.
Zoom Video Communications (ticker ZM) offered an alternative to in-person meetings. You were able to have meetings from anywhere in the world. Their stock went from $67 in January 2020 to a staggering $559 by October 2020 (a 734% increase)!
Amazon was another huge company that benefited. Closures meant people were forced to shop online now, and Amazon is the largest online retailer. Their stock price went from about $1900 in January 2020 to over $3250!
Here is a chart showing the overall sector. We are using the XLK ETF for this analysis. Just before the crash, it was at $101.72. With a drop of 31% it priced in at $70.04, and it is currently at $138.64. That is a 98% increase from its low or a 36% increase from pre-covid levels.
On the other end of the spectrum, we have the airline sector. Airlines were probably the sector hit the hardest by covid, along with other travel/vacation. With passengers almost dropping to zero, they saw their revenue plummet. Some airlines went bankrupt, and the ones that didn’t took on large amounts of debt to (hopefully) hold them through. In most countries, travel still hasn’t recovered to levels it was before the pandemic, though the large number of people getting vaccinated has helped a lot.
It will likely be a while before airlines get back to where they were, but for long term investors it may provide an opportunity for certain airlines that are poised for growth once the recovery is further under way. One thing you have to watch out for is the amount of debt they have taken on, and how those new interest payments will affect their future cash flows.
Here is a chart showing the airline sector, which we used the JETS ETF to analyze. It dropped 62% in just over a month at the start of the pandemic. It’s currently up 123% from its low. Still not fully recovered, down about 16% from its pre-covid value.
It will be interesting to see how many companies go back to having meetings in person compared to how many stick with their new solutions such as using Zoom, and how this affects the travel industry.
The financial sector took a hard hit, like every sector, at the start of the pandemic but has had a nice recovery since. Due to the number of customers and businesses not being able to pay their loans, many large banks added a large amount of loan loss provisions in the first quarter of 2020. Recently profit has surged, as bad loans were not as severe as originally anticipated.
Here is the chart for the financial sector. For the financial sector we are using the XLF ETF. It dropped from $31.07 on February 20th, 2020 to $17.66 on March 23, 2020 (a 43% drop). Since then it is up 112% from its low, or 20% from its pre-covid levels, to $37.49.
This was probably the biggest surprise to me while making this blog post. After a further look at a lot of the top holdings of this ETF, it appears a lot of the companies were able to pivot to online sales which helped propel them. It also didn’t hurt that GameStop was involved in a massive short squeeze!
Here is a look at the retail sector chart We used the XRT ETF for this analysis. It dropped from $46.10 on Feb 20, 2020 to $26.99 on March 23, 2020 (a 41% drop). It then recovered to all-time highs. As of May 26th, 2021 it was priced at $93.66, which is up a staggering 247% from the March 2020 lows. This is up 103% from pre-covid levels.
Do you think consumers will start shopping in stores again as more businesses continue to open?
Here we will go over some of the other sector’s numbers quickly without the graphs, as they are all fairly similar.
We will start with the Healthcare sector, for which we used the XLV ETF. Between February 21, 2020 and March 23rd, 2020 it dropped from $103.41 to $74.62 (28% decrease). It then recovered fairly well, increasing to $123.39 as of May 26, 2021, which represents a 65% increase from March lows or a 19% increase from pre-covid levels.
Next up is the Real Estate sector with the ETF IYR. At close on February 21, 2020, it was priced at 100.21. It dropped to a low of $57.84 on March 23, 2020. This is a drop of 42%. It has since recovered to $99.84 on May 26, 2021, which is a 72% increase from March lows or a slight decrease from pre-covid levels.
Covid-19 clearly had a large impact on all sectors, in particular at the start when there was so much uncertainty. As time passed, with government stimulus and companies adapting, most sectors have recovered with some reaching all-time highs. Some sectors came out stronger, such as the technology and retail sectors. Others barely survived, such as the travel sector.
Going forward, companies will have to continue to adapt. There are still a lot of unknowns with Covid-19, such as if we will reach the vaccination threshold needed for herd immunity, or If the vaccine will require annual boosters. There are still opportunities in certain sectors, you just need to dig a little deeper to find them!
Are you looking at any particular sector currently? Did any sector surprise you? Do you think any sector is currently undervalued? Let us know in the comments!