Volatility in the market has been coming off as countries are looking forward and ahead of the crisis. Reopenings of economies are coming up. Restrictions are becoming more relaxed and the fear of a very strong Covid-19 death spike is slowly going away.
The next challenge
The next challenge are the reopenings themselves. The reopenings are a positive on itself but it is also important to focus on the behavior of the Covid-19 during the reopening. And that is quite a bit of a black box. Is a second wave coming? No-one knows. Can we go one step forward every week/month? Or is it a long fight with one step back now and then as well?
Problems yet to come?
Also, so far not many companies have been getting into severe problems yet. They are still surviving but for how long? Revenue levels are not going to be back at pre-crisis levels soon. Companies with a lot of debt or already in longer term trends of declining revenue streams might be hit hard even if the economy is partly or nearly fully open again.
Shell throwing in the towel
That it is not a quick recovery when economies open is confirmed for example by the fact that Shell decreased the dividend heavily. It was the last thing that Shell ever wanted to do. It means, as they said as well, that they expect the corona crisis to have long-term effects on the oil markets. They do not expect a quick recovery. Most people have bought Shell for the dividend. Shell never lowered the dividends since WOII. What a stock! Never sell Shell is what people thought. In the current oil business it is important for companies to decrease spending, focus on the cash flow and survive the oil crisis. The ones that survive will come out stronger. Oil is still needed for a very long time and is expected to peak somewhere around 2035. Normal demand, without the Covid effect, is expected to increase year over year.
Importance of a stock list
As an investor it is quite important to have a list of stocks on your radar to potentially buy in case of reopenings of the economies and a market recovery. Some stocks are still close to the year lows and are heavily affected by the Covid-19. Though, if things turn, these are also the stocks that do have an immense amount of potential as long as they are not overloaded with debt. To read more about these kind of stocks, you can have a look below.
