Prepare for 'Painful Two Weeks' With 5 ETF & Stock Strategies

Sanghamitra Saha

2 April 2020 at 8:00 am

After a worst-ever first quarter, U.S. market saw a sombre start to the second quarter as President Trump cautioned about ‘very painful two weeks’ due to the rapid spread of coronavirus. Note that the United States has the highest number of confirmed COVID-19 cases, with more than 200,000 people infected. No wonder, three key U.S. equity gauges slumped more than 4% at the start of the second quarter.

As expected, the U.S. manufacturing sector shrank in March, with activity hitting its lowest level since 2009, per data firm IHS Markit. Manufacturers also cut their workforce at the sharpest rate since October 2009. Data from ADP and Moody’s Analytics showed U.S. companies cut 27,000 jobs through Mar 12.

Actual losses for the month were far worse, as shown by the record number of jobless claims in the week or Mar 20. Meanwhile, March’s ISM manufacturing index dropped to 49.1, hinting at contraction. A reading of more than 50 marks expansion. There is huge uncertainty about any recovery in the virus contagion scenario and the resultant rebound in demand.

Simply put, the coronavirus pandemic has led to a nationwide shutdown, bringing activities and businesses to a halt. Unemployment has also been soaring.

How Will You Trade Now?

Against this backdrop, all you can do is invest in areas that have stayed steady in Q1 and remained resilient to or have benefitted from the virus outbreak. Below we highlight a few.

Discount Retailers to Win Big in Post-Virus Economy?

Probably yes! If there is a slow U-shaped recovery in the U.S. economy, dollar stores would gain as cash-strapped consumers would find it a better go-to place. JPMorgan analyst Matthew Boss believes that “Dollar General DG and Dollar Tree DLTR are among the retailers that could grow stronger after the COVID-19 pandemic subsides,” quoted on CNBC. Ross Stores Inc. ROST is another potential winner, per the analyst.

Dollar General announced to give 10% discount to first responders and invest $35 million in employee bonuses in an environment where many are cutting jobs, bonuses, dividends and buybacks. First Trust Nasdaq Retail ETF FTXD and VanEck Vectors Retail ETF RTH have solid exposure to Dollar General and Ross Stores. Notably, Discount Stores lost 8.7% against S&P 500-based ETF IVV’s 12.2% loss in the past month.

Virus or Not: Work-From-Home Stocks are Long-Term Picks

The work-from-home trend is here to stay. Even if shutdowns are lifted, many service sectors may opt for work-from-home for a longer period of time on convenience basis. Here is where companies like Zoom Video Communications Inc. ZM, which allows individuals to meet and work productively when meeting in-person isn't possible, and CrowdStrike Holdings Inc. CRWD, a provider of cloud-delivered endpoint cybersecurity protection, stand to gain.

Cloud ETFs like WisdomTree Cloud Computing Fund WCLD, Internet ETFs like O'Shares Global Internet Giants ETF OGIG and cyber-security funds like iShares Cybersecurity and Tech ETF IHAK appear as long-term beneficiaries.

Oil’s Pain is Tankers’ Gain

Now that the world is awash with $20-oil and production is still brimming, producers need to store oil and wait for decent prices so that they can break even/lower losses. With storage space running out, U.S. crude producers have to rely on tankers. This in turn boosted Supertanker freight rates as producers, refiners and traders rush to get ships for transport or store the commodity. The second quarter may now be "one of the greatest quarters in history for large crude carriers,” per an analyst. The beneficiaries of the move are DHT Holdings Inc. DHT and Frontline Ltd. FRO.

Invest in Stay-at-Home Stocks & ETFs

Ordering food and groceries online, downloading video games, steaming videos will continue to remain hot in Q2. So, Domino's Pizza Inc DPZ, Netflix NFLX, Electronic Arts EA, Take-Two Interactive Software TTWO, ProShares Long Online/Short Stores ETF CLIX and VanEck Vectors Video Gaming and eSports ETF ESPO should stay afloat amid coronavirus selloffs (read: 2 Solid Reasons to Bet on Video Gaming Stocks & ETFs Now).

Intermediate-Treasuries Good Bets

A few days back, cash-like ETFs were in high demand as coronavirus-led recessionary fears made liquidity the need of the hour. However, those lost appeal with the Fed’s intervention. Yields have been declining mainly for the five-year and seven-year Treasury bonds lately, making those a truly desirable place. iShares 7-10 Year Treasury Bond ETF IEF and Schwab Intermediate-Term U.S. Treasury ETF SCHR are two winning products (read: Time to Buy Top-Ranked Intermediate Treasury ETFs?).

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>

Australian Associated Press
China to co-operate with doping probe into swimmers
Chinese authorities say they'll co-operate with the independent investigation into how WADA handled the doping case involving their swimmers.
15 minutes ago
Australian Associated Press
Injured Starc avoids run carnage in IPL's record chase
Centurion Jonny Bairstow has led the biggest successful T20 chase in history for Punjab Kings -- with Mitchell Starc missing the IPL mayhem through injury.
29 minutes ago
Australian Associated Press
Bad day against clock for Plapp at Tour de Romandie
Australian champion Luke Plapp has dropped out of the podium places after a tough day in the saddle at the Tour de Romandie.
2 hours ago
Australian Associated Press
Port Adelaide worry over 'nasty' Powell-Pepper injury
Port Adelaide's Sam Powell-Pepper faces a nervous wait after coach Ken Hinkley feared the Power forward had suffered a serious knee injury.
2 hours ago
Australian Associated Press
Manly concerns over Olakau'atu after dangerous throw
Manly coach Anthony Seibold and captain Daly Cherry-Evans believe Haumole Olakau'atu shouldn't be banned for a dangerous throw against Parramatta.
2 hours ago
Australian Associated Press
National gun register receives $160m in funding
The government has set aside more than $160 million over four years to create a new national gun register aimed at increasing community and police safety.
2 hours ago
Australian Associated Press
EPL interest in Roar prodigy Waddingham deserved: coach
Tottenham are among several big European clubs keen to sign Brisbane Roar striker Thomas Waddingham and his coach Ruben Zadkovich explains why he's in demand.
2 hours ago
Australian Associated Press
Rallies highlight 'horrible fear' of gendered violence
Women and their allies have had enough of gendered violence so they're organising rallies across Australia to demand political leaders do something about it.
2 hours ago
Australian Associated Press
Birdie blitz will decide LIV Golf winner: Leishman
Australian Marc Leishman is forecasting plenty of birdies as he heads into LIV Golf Adelaide's second round four shots behind the leader.
2 hours ago
Australian Associated Press
Romanian court sends Tate trafficking case to trial
A court in Romania's capital has ruled that a trial can start in the human trafficking case of influencer Andrew Tate.
3 hours ago
Australian Associated Press
No sign of arm woes as Alcaraz returns with Madrid win
Carlos Alcaraz has shown no sign of the arm injury that sidelined him as he eased to victory in his second-round match at the Madrid Open
4 hours ago
Australian Associated Press
Pogacar could go for unique Grand Tour treble: Contador
Tadej Pogacar could win all three Grand Tour races in the same season, says two-time former Giro d'Italia winner Alberto Contador.
4 hours ago
Australian Associated Press
Luck runs out for Saville after second Madrid exit
Daria Saville, the only Australian woman in the main draw at the Madrid Open, has been knocked out -- for the second time in the tournament.
7 minutes ago
Australian Associated Press
Fire at Brazil guesthouse leaves at least 10 dead
A fire at a guesthouse in Brazil's southern city of Porto Alegre has killed at least 10 people, officials say.
6 hours ago
Australian Associated Press
Captain Rozee among injuries in Port's win over Saints
Captain Connor Rozee has suffered a hamstring injury in Port Adelaide's gritty 10-point win over St Kilda at the Adelaide Oval.
6 hours ago
Australian Associated Press
Sivo brain snap sums up Eels' woes in loss to Manly
Parramatta have given up a second-half lead for the second time in as many weeks, watching a 14-6 advantage turn into a 32-18 defeat to Manly.
6 hours ago
Australian Associated Press
Ibusuki double helps Adelaide beat Roar in thriller
Japanese striker Hiroshi Ibusuki's two goals secured Adelaide United a 4-3 away A-League Men win over Brisbane and has him in the contract sights of the Roar.
7 hours ago
Australian Associated Press
Briton charged over alleged Russia-linked arson attack
Prosecutors in the UK have charged five men with offences related to alleged hostile state activity "likely to benefit Russia".
7 hours ago
Australian Associated Press
Turkish court convicts Syrian woman of Istanbul bombing
A court in Turkey has imposed seven life sentences on a Syrian woman convicted over a 2022 bombing that killed six people and injured 100 others.
8 hours ago
Australian Associated Press
Chiefs storm past Waratahs for easy Super triumph
The Chiefs have continued their push towards the Super Rugby Pacific finals, getting out of an early 12-0 deficit to beat the NSW Waratahs on Friday night.
8 hours ago

Latest stories