COVID-19 Implication For Businesses

Just as no man is an island, no economy operates in isolation. In the wake of the Covid-19 pandemic, China's moment of crisis has caused a ripple effect across the global economy. Chile is reeling from reduced copper demand, Germany from auto part shortages, OPEC from an oversupply of oil and the North American automotive subsector from shortages of electrical components. The same goes for Southeast Asia, where most of the populace are staying at home with only those designated as 'essential' continuing to go to work. So, this begs the question, what is it going to be like post-Covid 19? As investors, companies or individuals looking to start a business, what industry is faring well or maybe even thriving?

Let us look at some facts first. S&P global did a fantastic job analysing sectors most and least affected by Covid-19 so far. They leveraged the Credit Analytics Probability of Default Model Market Signals (PDMS) which uses stock price movements and asset volatility as inputs to calculate a one-year probability of default (PD).

Industries Most Impacted By COVID-19

It doesn't come as much of a surprise to most as the tourism and travel industry has been hit the hardest. The main reasons for the increased PD are the mass grounding of air traffic, border closures, and shelter-in-place policies across the globe, all of which have caused detrimental impacts on stock performance and raise concerns about the potential viability of some Airlines and Casinos . Oil prices have dropped tremendously due to drastic reduction in demand, however OPEC just announced that it foresees Oil pricing to rise to $40 per barrel during second half of 2020.
The period after the 9/11 disaster represents a (potentially optimistic) starting point for understanding the airline industry recovery from the Covid-19 pandemic.
Dean Donovan, Chairman of Stellar Labs and Co-founder of Volaris, states that the period after the 9/11 disaster represents a (potentially optimistic) starting point for understanding the airline industry recovery from the Covid-19 pandemic. In both situations, an exogenous event triggered a market crash and increased consumer anxiety about flying that decreased demand for a long period of time. He predicts that volume wont regains its peak for 3 to 5 years, and that pricing will lag behind volume for about a year. However, he remains optimistic, and believes that it the industry can innovate to remain afloat.

Industries Least Impacted By COVID-19

Insurance seems to largely unaffected, with barely a 0.4% increase in PD. This suggests, despite there being less agents on the ground, business hasn't been affected much and possibly, that more people are interested in getting insurance in light of the global pandemic. With the increased demand for healthcare equipment worldwide and that most people stuck at home resort to buying products online, healthcare and industrial REITs have been largely unaffected by Covid-19 so far.
Insurance seems to largely unaffected, with barely a 0.4% increase in PD. This suggests, despite there being less agents on the ground, business hasn't been affected much and possibly, that more people are interested in getting insurance in light of the global pandemic. With the increased demand for healthcare equipment worldwide and that most people stuck at home resort to buying products online, healthcare and industrial REITs have been largely unaffected by Covid-19 so far.
However, this does not mean that these industries will continue to be relatively unaffected.
However, this does not mean that these industries will continue to be relatively unaffected. Reports suggest the insurance industry is going to be hit just as badly or even worse than those industries above, they have lagged due to the drastic increase in volume of claims and inquires. Increase in mortality rate, cancellations of major events, failing businesses, all these will drive up claims.
This data suggests that REITs is a good sector to invest in during the pandemic, but there are more. Steam and Riot Games, popular video game distributors and developers have announced record number of logins to their games in the past month. Streamers on popular streaming service Twitch have experienced an increase of more than 23% engagement in the last month. People stuck at home are turning to other forms of entertainment they well stick to it even after the pandemic. We shall continue to monitor the situation and bring in the opinions of our experts in various fields to weigh in on the situation.
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