The ending of the pandemic and the markets: What can we expect?


The pandemic has caused a number of changes in the development and functioning of business worldwide, which has affected countries and their sectors to varying degrees. The stock markets reacted to the situation, which led to higher sales of shares in the more affected sectors. Exactly the shares of these companies registered a weaker recovery in the coming months.

Most economies have been recovering gradually in recent months and have reduced most of the restrictive measures. This has a positive impact on the business activity of the countries and the profits of the companies.

The question that concerns traders and investors at the moment is "The securities of the companies from which sectors have the greatest potential for realizing good returns in the times of the passing pandemic?".

How the pandemic affected the stock market?

Many companies quickly adapted to the situation, as they already had the necessary infrastructure and customer base, which led to a better performance of their shares.

Others, most notably companies such as online retailer Amazon, have benefited from the closure of physical retail stores, which has given them good stock performance and a significant increase in profits.

No less is the percentage of companies that for one reason or another failed to adapt their business to anti-epidemic measures. In fact, these are the companies most affected since the beginning of the pandemic, and many of them have lost their market position, suffered significant losses, or gone out of business. These are also the companies that currently have the greatest potential to provide better returns. The reason is that their stocks are traded at lower prices, which is due to the worsened prospects for the past year for their businesses and the lower profits.

Which sectors are most affected?

Despite the negative impact of the crisis on all businesses, there are some that have been more affected than others, as the course of their activities was severely limited and at times even impossible.

S&P Global statistics show the most affected sectors by the first half of 2021 and at the same time give us an idea which stocks will have the greatest potential when countries end all measures and economies are recovered fully.

The data show that based on an iterative model that includes the value of the asset and its volatility, the most affected sectors are:

• Transportation - mainly airlines.

• Retail sales - companies that do not produce consumer staples.

• Entertainment - from various amusements activities and cruise companies to casinos and sporting events.

• Hotels and restaurants - this includes various food chains, as well as companies such as Booking.

• Energy sector - mostly companies engaged in oil and gas production.

The normalization of the situation on a global scale allowed these companies to resume their activities, but under strict anti-epidemic measures, which continue to limit the realized profits and their business growth.

The full release of the measures will allow them to use the full capacity they have, which will have the potential to increase their profits but will also provide opportunities for the growth of their activities.

What was the impact on prices?

The pandemic has significantly increased the already existing imbalance between the prices of the stocks from different sectors. Investors withdrew their capital from companies in the more affected sectors to those in which the impact is significantly less.

However, due to the great uncertainty, it is noticeable that most market participants chose to invest more of their capital in leading and established companies. The main reason is that they have enough financial, intellectual, and technical potential to meet the challenges and create new competitive advantages.

A Morningstar survey shows that the technology sector performed best in the last year, followed by securities in the communication sector. They are followed by finance and healthcare, which are surprisingly followed by a number of representatives of cyclical companies. But this also includes companies like Walmart, which primarily offer consumer staples, as well as established companies like Coca-Cola and online retailers like Amazon.

What market opportunities exist now?

The current situation provides different perspectives for movements on the financial markets in the medium term, which can be used by both traders and investors.

Many companies saw an opportunity to improve their shortcomings, while others further expanded their strengths, which will provide them with better conditions for growth in the future.

On the other hand, the movement of capital that caused the pandemic led to an artificial increase or decrease in most securities prices. Currently, there are companies on the market that are highly overvalued and do not justify the realized profits, which is due to most capital directed to them, but there are also those that are undervalued and have the potential to increase their prices.

This provides opportunities for traders to trade in both directions, and good prices for the investors if they have a medium or long-term horizon.

Stock trading

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