Playing with my crystal balls....

[TUK020]

After reading an FT report on the number of candidate vaccines in Phase 3 trials, and the level of advance ordering by governments for differing candidates, I spent some time ruminating on how things might turn out.

Important to remember, an effective and safe vaccine is just one of the possible routes out of this mess - the others being an effective treatment that significantly helps those who get sickest from it (already happening to some extent, death rate dropping relative to infections as hospitals work out better how not to kill the patients), and the possible emergence of a mutated/attenuated variant of the virus that protects against the harmful version (how polio was initially dealt with). First reports of the latter have emerged in Singapore of a new variant that causes much less harmful effects.

Taking all of the above into account, it is quite possible that within 6-9 months, the pandemic will be over to all intents and purposes in developed countries with established and working public health services. "Possible", not forecasting that this is a certainty.

In this case, it is quite feasible to construct a hypothesis that markets will surge on news of this sort of outcome becoming more likely. Note here, I am not ruling out more mayhem betwixt now and then - plenty of opportunity for second wave death surge, drastic lock downs, end of Brexit transition lorry jams backing up the M25, other mishaps by Boris the Incompetent and buddies.

Assuming a route to pandemic visibly becoming under control, what sorts of investments should do well?
Some industries should hit boom time (thinking Pubs and Beer will come back into fashion big time. Maybe hang onto my bombed out MARS stock?)
Some companies will have the market opportunity to recover, but will be so damaged by the cash flow hit/interruption that they will sink into zombiehood (banks? very indebted companies?)
Others will never be the same again, due to seismic shifts that were accelerated rather than only happening because of COVID (office property & mass transit, Pret a Manger as commuting/office habits forever change?)

If anyone has any thoughts/insights to add to this thought experiment, I'm keen to read them!

[monabri]

I'm thinking of a swing back to (1) value shares with reasonable yields (let's say <5%) and (2) companies that will make a strong recovery.

Share price recovery floating on an influx of foreign money but only into the bigger companies (FTSE100), especially the multinationals who earn a large chunk of their earnings elesewhere and not in Brexitland.

Faced with effectively zero interest rates in the US/Europe/UK where does one tuck away investment monies? The growth stocks have had a good run, time to take some profit and reinvest into the elephants.

[dealtn]

After reading an FT report on the number of candidate vaccines in Phase 3 trials, and the level of advance ordering by governments for differing candidates, I spent some time ruminating on how things might turn out.

Important to remember, an effective and safe vaccine is just one of the possible routes out of this mess - the others being an effective treatment that significantly helps those who get sickest from it (already happening to some extent, death rate dropping relative to infections as hospitals work out better how not to kill the patients), and the possible emergence of a mutated/attenuated variant of the virus that protects against the harmful version (how polio was initially dealt with). First reports of the latter have emerged in Singapore of a new variant that causes much less harmful effects.

Taking all of the above into account, it is quite possible that within 6-9 months, the pandemic will be over to all intents and purposes in developed countries with established and working public health services. "Possible", not forecasting that this is a certainty.

In this case, it is quite feasible to construct a hypothesis that markets will surge on news of this sort of outcome becoming more likely. Note here, I am not ruling out more mayhem betwixt now and then - plenty of opportunity for second wave death surge, drastic lock downs, end of Brexit transition lorry jams backing up the M25, other mishaps by Boris the Incompetent and buddies.

Assuming a route to pandemic visibly becoming under control, what sorts of investments should do well?
Some industries should hit boom time (thinking Pubs and Beer will come back into fashion big time. Maybe hang onto my bombed out MARS stock?)
Some companies will have the market opportunity to recover, but will be so damaged by the cash flow hit/interruption that they will sink into zombiehood (banks? very indebted companies?)
Others will never be the same again, due to seismic shifts that were accelerated rather than only happening because of COVID (office property & mass transit, Pret a Manger as commuting/office habits forever change?)

If anyone has any thoughts/insights to add to this thought experiment, I'm keen to read them!

It's quite difficult to see how closely the world post Covid will look compared to before (and during), and then to see whether the market pricing of such is already there or not.

I suspect, like you in the scenario you paint, that the general market is likely to rally from where we are now, and I think it will be interesting to see what happens to the stocks that have already rallied to highs. Will they go higher still, or down, or just lose out relatively to the current losers in a broad rally?

I suspect that longer term some unfashionable sectors might actually recover nicely. Gyms for instance are currently seen as places to potentially catch infections from sweaty people. That view might prevail for some time but I suspect the "wake up" that it is probably better to be fitter overall than not will win out and Gyms (and leisure) stocks may do ok from this. Physical fitness may come to be seen as an alternative to medicine (and pharmaceutical stocks).

On the theme of pharmaceuticals I am torn. P/E used to be stratospheric, and then single digit was the norm. Pharma is still seen as hugely important and I don't see that changing, but pressures to deliver vaccines etc. for no profit might be a hard trend to overcome. Turnover could rise but margins fall to more than offset.

I am still of the view that real estate is still a hugely important sector (and investment). What is likely to transpire is changes of use. Housing is still too scarce, and prices rising, yet many shops, pubs etc. are seen as dramatically lower in value on the usual "death of the high street" type analysis. I would hope the market (and local authorities) will come to see solutions of changing the nature of town centres etc such that property generally is profitable once more. Even offices which are seen as yesterday's use, it seems, will likely have there day. I know of many that would rather work in them than the office. I also think the shifting of the cost of office proviso away from companies and to employees (renting to buying bigger homes to accommodate a spare room or garden office) only has so much "legs", and that may already have been priced by the investment community.

I suspect the Work From Home theme will actually turn out to be Work Flexibly. As such I see strong futures for companies able to deliver office solutions, say in telephony. I'm less interested in companies such as Zoom, but those such as LoopUp (LOOP) and Cloudcall (CALL) both of whom reported to the market today, for instance.

What I am undecided about presently are the future of some of my more successful investments during lockdown. Companies such as Frontier Developments (FDEV), Gear4Music (G4M) and Best Of The Best (BOTB) which have all seen increased demand for "online" during lockdown (and beyond). This isn't the sole reason for their strength though and I am concerned the market will reprice some of the growth out of them, even if they continue to perform, on the perception of a relative move back "offline". Running winners is as hard as selling losers it seems.

[PinkDalek]

If anyone has any thoughts/insights to add to this thought experiment, I'm keen to read them!

You may wish to Tu[c]k into a thread over at 'Macro and Global Topics'. The link should be to a recent post on a 47 page thread so far.

Coronavirus - (macro investment aspects only please)
viewtopic.php?p=342121#p342121

It may or may not provide further food for thought.