How To Invest In A COVID Recovery

The Wealth Advisor Contributor
May 26, 2020

What’s the best way to invest in a COVID-19 recovery?

Here’s what you need to know.

COVID-19: Economic Recovery

UBS Chief Investment Officer Mark Haefele outlined three scenarios for an economic recovery and where you should be investing.

Upside Case: Buy cyclical and value stocks

An upside case assumes that the recent economic opening across the U.S. leads to an economic recovery in June—without a second lockdown. This thesis may be challenging, particularly if there is a second wave of Coronavirus in the fall, which many speculate will lead to a second phase of lockdowns. 

What stocks should you buy if there is an upside COVID economic recovery? 

  • Buy cyclical and value stocks
  • Focus on mid-caps over large-caps 

Which sectors will benefit in an upside COVID economic recovery? 

  • energy
  • automotive
  • beverage 
  • retail 

Base Case: Buy credit and focus on these sectors

Should you focus on equities or credit investments if there is a base case COVID economic recovery? 

  • Focus on credit investments
  • Due to monetary policy, you can invest across the credit spectrum
  • Examples: investment grade, high yield and emerging markets

Which sectors will benefit in a base case COVID economic recovery? 

  • healthcare
  • automation
  • cybersecurity
  • e-commerce
  • sustainable investments

Downside Case: Buy gold

There are many ways to imagine a continued economic downturn: more job losses, slower rehiring, stock market decline, heightened volatility, increased debt default and bankruptcies.

Why is buying a gold a good investment during a recession?

Traditionally, gold is considered a safe haven during a recession. If the U.S. dollar gets devalued and the U.S. national debt continues to grow, the price of gold can increase. Haefele also recommends buying Treasury Inflation-Protected Securities to fight against inflation.

3 Sectors Poised For Growth

UBS notes three more sectors that are poised for growth in the wake of the COVID-19 pandemic:

  1. Food: growth in plant-based meat alternatives and food delivery
  2. Healthtech: growth in tele-medicine and genetic therapies
  3. Automation: growth in warehouse automation and online shopping 

This article originally appeared on Forbes.

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