Is It Time to Dump “Reopening” for “Resurgence”?
The numbers are sparking concern… and they’re suggesting that the U.S. is entering the fourth wave of the pandemic.
Over the last few weeks, the number of COVID-19 cases has more than doubled.
The seven-day average of cases has increased 185% since June 20. And new daily cases of COVID-19 jumped 210% from June 20 to July 17.
Now, the current figures are nowhere near where they were at the height of the pandemic in late 2020 and early 2021.
But it’s an unwanted fat tail that appears to be threatening the strength of the global economic recovery and reopening.
Investors are fleeing from stocks to the safety of bonds as they try to shield their portfolios from another “corona crash.”
Here’s why the market’s move yesterday is quite possibly an overreaction…
There are currently three vaccines authorized for use in the U.S. from Johnson & Johnson (NYSE: JNJ), Moderna (Nasdaq: MRNA) and Pfizer (NYSE: PFE)/BioNTech (Nasdaq: BNTX).
At the moment, a majority of American citizens have received at least one dose of a vaccine. More importantly, about 80% of those over age 65 are fully vaccinated. And nearly half of Americans are fully vaccinated from COVID-19.
The country fell short of the vaccination goal that was set for July 4.
But the stark reality is that 99.5% of COVID-19 deaths in the last six months have occurred among the unvaccinated population. And this isn’t an issue of access. Instead, it’s one of reluctance.
So there is the potential for a backslide.
The delta variant isn’t something to be taken lightly, as it now accounts for roughly one-quarter of new COVID-19 cases.
Nonetheless, the infection rates are still 90% below their peak in January.
The Reopening Trade Crash Landing
Global markets were rocked on Monday.
The Dow Jones Industrial Average shed more than 900 points, or nearly 3%.
But the sectors hit the hardest were those reopening trades – airlines, cruise ship operators and restaurants.
Norwegian Cruise Line Holdings (NYSE: NCLH) slipped 5.5% as the U.S. Global Jets ETF (NYSE: JETS) and Royal Caribbean Cruises (NYSE: RCL) tumbled more than 4%. And the AdvisorShares Restaurant ETF (NYSE: EATZ) dropped 2.7%.
Over the past month, these sectors have struggled. And panic is starting to build as we sail deeper into earnings season.
We’re entering a key stretch for airlines, cruise lines and restaurants.
For instance, Alaska Air Group (NYSE: ALK), American Airlines (Nasdaq: AAL), Hawaiian Holdings (Nasdaq: HA), JetBlue Airways (Nasdaq: JBLU), United Airlines (Nasdaq: UAL) and Southwest Airlines (NYSE: LUV) will all report earnings over the next week.
Carnival Corporation (NYSE: CCL) and Royal Caribbean will report in early August.
The uncertainty fueled by the resurgence of COVID-19 cases in recent weeks has undermined any upside investors once spied in these companies.
And when these find a bottom once again, there will be the potential for an enormous run to the upside.
So I think these companies make great multiyear opportunities. Buy now while tickets to these rides are on sale.
But for immediate gains, there’s another route investors should take.
The Resurgence Opportunity
In the early days of the pandemic, we pointed investors to a bevy of “stay-at-home economy” opportunities.
And many of these became household – if not somewhat dreaded – names.
With COVID-19 cases on the rise and the looming potential for a step back in reopening momentum, there aren’t many green pastures for investors to peacefully hide out in.
But the shares we can expect to head higher are those stay-at-home opportunities from 2020. I’m now calling them “resurgence trades.”
These include all those great companies – which have pulled back from their pandemic peaks – that are online retailers, digital business solutions providers and telemedicine innovators.
I’m talking about Chewy (NYSE: CHWY), DocuSign (Nasdaq: DOCU), Just Eat Takeaway.com (Nasdaq: GRUB) (formerly Grubhub), Sea Limited (NYSE: SE), Teladoc Health (NYSE: TDOC), Wayfair (NYSE: W), Zoom Video Communications (Nasdaq: ZM) and other digital denizens of the corporate world.
Investors shouldn’t panic… and they don’t have to cower in 10-year Treasurys either.
They can profit by shifting into these resurgence opportunities for now. And we can all work together to rein in the uptick in COVID-19 cases.
Bull and bear markets move in waves. Investors are carried on the rising and falling tides of red and green.
But discounts abound for both short- and long-term-minded traders. So keep calm and take advantage of the shifting currents.
Here’s to high returns,
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