Coronavirus outbreak offers great stock market investment opportunities

If you are looking for a comparison reference for the COVID-19 market selloff, you’d need to go back to the 1929 stock market crash, when the Dow Jones Industrial Average had dropped 24.8% in a single day, paving the way for the Great Depression.

Unfortunately, it seems that the financial crisis triggered by the coronavirus outbreak can’t compare to the financial impact of the global financial crisis of 2008.

“This is an unprecedented situation, this is worse than 2008, this is worse than 1987, this is the worst crisis to hit financial markets since the Great Depression,” analyst Stephen Isaacs told CNBC.

The ongoing crisis has also introduced a new era of stock market volatility and is driving records numbers of customers online stockbrokers. In the lifespan of just two weeks, the FTSE 100 recorded the second worst day on the record, and second best day in its history. The index closed down 10.87% lower on March 12, before gaining 9.05% on March 24. 

Hence, investing during these troubled times isn’t easy, but it can prove to be highly profitable as these selloffs make certain assets extremely cheap. For instance, it is logical that the “stay-at-home” stocks were going to skyrocket as the vast majority of people across the world spent a lot of time inside their homes.

Netflix, for instance, saw its stock price surge to record highs. Shares of the streaming giant gained 50% over the last few weeks. Shares of Roku, one of Netflix’s biggest rivals, exploded more than 110% since mid-March on strong growth during the coronavirus pandemic. 

Tesla stock has proved to be another great buying opportunity in the recent weeks. A prominent stock market analyst from Credit Suisse, Dan Levy, believes that Tesla is much better positioned to recover from the ongoing crisis than the vast majority of traditional carmakers. 

According to Levy, Tesla “competitively has more edge in the transition to EV as coronavirus disruption will make it more difficult for legacy automakers to balance the long-term shift to EV in the face of near-term cycle disruption”.

Similar to Roku, shares of Tesla have gained more than 110% in the last few weeks. While we are not sure whether the stock market has really turned the corner, we are sure that the ongoing volatility in the market will continue to create compelling buying opportunities. 

 

 

Disclaimer: This content does not necessarily represent the views of IWB.