Coronavirus was devastating in every sense of the word. Besides the huge loss of life and the effect on overall physical and mental health that the pandemic caused, the global economy also took a massive hit during 2020.
Some sectors were affected worse than others, and share prices rose and fell accordingly. But as lockdowns lift and vaccination reaps results, in some cases it’s the stocks that dropped the hardest that are recovering most dramatically.
The threat of the virus caused us to rethink how we live our lives, at least temporarily. Government restrictions, lockdowns, social distancing, and staying home slowed the spread of COVID-19 and allowed time for the vaccination rollout, but these measures were instituted at a cost. Retail shops and leisure outlets like pubs and clubs were forcibly closed, sometimes for months, while commercial airlines were grounded and hotels, B&Bs, and vacation homes stood empty. Train and bus operators, plus the automobile and fuel sectors, also felt the pinch as people were encouraged not to travel outside their local area unless it was essential.
Pent-up demand
For those businesses that managed to keep their heads above water through 2020, however, 2021 brought the promise of a light at the end of the tunnel. As restrictions are relaxed, people are desperate to travel, go on vacation, and enjoy all the social activities that had been curtailed. After hitting an all-time low during the pandemic, travel stocks are now rising significantly, with tour operators and airlines reaping the reward of months of pent-up demand.
The economic recovery still has a long way to go, which means there’s still plenty of room for growth. While some stocks have now exceeded pre-pandemic prices, others are still climbing steadily and represent a strong investment, as their future worth will almost certainly exceed their current price by a large margin.
Long-term optimism
In many cases, the rise in share value is driven by long-term optimism among investors as much as by current profits. The market seems confident that we will return to normality sooner rather than later, and stock prices are reflecting this. Whether this will pan out as expected depends on the performance of the virus and the vaccines, as well as on government responses, over the coming months. The continuing recovery also requires the public to share in investor optimism and to show this by continuing to book vacations, concert tickets and so on.
High street recovery
Besides the travel sector, another area where stocks are thriving is in high street retail. Here, however, results are mixed, with some businesses doing better than others. Some major retailers didn’t survive 2020, while others have closed bricks-and-mortar stores in some territories and have cut back to an online service.
The upside for those firms that have maintained a high street presence is reduced competition, and retailers like Urban Outfitters, and Primark in the UK, are among those doing particularly well. In real estate, shopping malls in the US are seeing a surge in profits as people return to the stores, but in Europe, there is still room for improvement.
Entertainment
Live music, theatre, and comedy are among the experiences that people have missed the most during lockdowns, as well as cinema and the opportunity to socialize with friends in bars and nightclubs. As entertainment venues reopen, many can’t wait to get out again, but others are still wary for several reasons. They may be put off by safety measures or feel that safety measures are not strict enough. Others may refrain from buying advance tickets as they fear that events will be canceled or postponed once more, or that they will be unable to go.
Nevertheless, international ticket sales company Live Nation Entertainment saw stocks rise 80% between October 2020 and February 2021, indicating that the sector is bouncing back effectively. The demand for live entertainment is strong, but take-up relies on the economy is generally healthy. People need to have enough surplus income to justify spending it on nights out.
Conclusion
The stocks that sank the lowest during the pandemic have the most potential for growth, as they recover their pre-2020 value and then exceed it. A strong desire to return to normal is both stimulating business and creating an optimistic mood among investors, leading to a rise in market prices. Travel, retail, leisure, and hospitality are among those sectors hardest hit by lockdown that are now bouncing back and are now worth watching and perhaps investing in as a result.