The World Health Organization (WHO) reported a record increase in global novel coronavirus cases on Jun 21. The major rise in cases was in North America and South America. On the other hand, South Korea became the first country to announce the second wave of coronavirus.
Though the second wave of the contagion is less likely to hit global economies as hard as the first one did as further lockdowns are less likely on the global level, slowdown in economies activities is in the cards.
Massive stimulus by the governments and central banks would boost government debt. "Government debt/GDP ratios will rise by around 19 percentage points, nearly twice as much as in 2009 during the (global financial crisis) the rise in debt burdens will be more immediate and pervasive, reflecting the acuteness and breadth of the shock posed by the coronavirus," per Moody's (NYSE:MCO).
Oil prices, which have steadied a bit of late, are likely to skid ahead on reduce demand too. Against this backdrop, below we highlight a few ETF areas that could win/lose majorly amid the second wave of coronavirus.
Investing Areas Likely to Soar
Technology
This is a winning investing area amid pandemic. The Internet space has been performing well lately. Notably, social distancing triggered by the coronavirus outbreak has benefited communications and activities over Internet in recent months. Moreover, the work-learn-shop-from home trend boosted the entire tech sector. Winning ETFs will be O’Shares Global Internet Giants ETF (OGIG), Global X Cloud Computing ETF CLOU, First Trust Nasdaq Cybersecurity ETF CIBR) and ETFMG Prime Mobile Payments ETF IPAY.
Gold Bullion & Miners
A super-dovish Fed and the resultant decline in the strength of the greenback, fears of prolonged global recession, low oil prices, string safe-haven demand amid bear market rallies will likely boost gold bullion as well as miners.
For bullion investing,SPDR Gold Trust (P:GLD) GLD, iShares Gold Trust IAU, Aberdeen Standard Physical Gold Shares ETF SGOL and GraniteShares Gold Trust BAR are lucrative options. Among mining ETFs, VanEck Vectors Gold Miners ETF (NYSE:GDX) GDX, VanEck Vectors Junior Gold Miners ETF GDXJ are good bets.
Investing Areas Likely to be Under Pressure
High Dividend & Buyback
The current COVID-19 pandemic has made cash a king. The sheer need for restoring cash has caused many companies to stop buying back their own stocks. The government assistance also mandated some virus-hit companies to halt on buybacks. Dividend cuts have also been rampant during this phase. Many firms are liquidating their big stakes in other companies too to hoard cash.
Analysts from Goldman Sachs (NYSE:GS) have estimated that stock buybacks could decline 50% by the end of this year. All these could go against the fund revolving around buybacks and high dividend payments. iShares U.S. Dividend and Buyback ETF DIVB is such an option.
Travel & Tourism
The airlines, travel and tourism industry has been hurt the most by the pandemic. Air travel has rebounded slightly over the past couple of weeks, but most people are still afraid of flying. The same goes with hotel stocks. U.S. hotel occupancy fell by 50.2% to 35.4% during the week ending May 23 compared to the same period in 2019.
Meanwhile, global airlines body IATA said recently that airlines across the world are expected to lose $84.3 billion in 2020 due to the coronavirus pandemic, calling it the "worst year" in the aviation industry’s history. This puts U.S. Global Jets ETF JETS and Invesco (NYSE:IVZ) Dynamic Leisure and Entertainment ETF PEJ in a tough spot.
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SPDR Gold Shares (NYSE:GLD): ETF Research Reports
iShares Gold Trust (IAU): ETF Research Reports
Aberdeen Standard Physical Gold Shares ETF (SGOL): ETF Research Reports
U.S. Global Jets ETF (JETS): ETF Research Reports
VanEck Vectors Gold Miners ETF (GDX): ETF Research Reports
Invesco Dynamic Leisure and Entertainment ETF (PEJ): ETF Research Reports
ETFMG Prime Mobile Payments ETF (IPAY): ETF Research Reports
VanEck Vectors Junior Gold Miners ETF (GDXJ): ETF Research Reports
GraniteShares Gold Trust (BAR): ETF Research Reports
iShares U.S. Dividend and Buyback ETF (DIVB): ETF Research Reports
Global X Cloud Computing ETF (CLOU): ETF Research Reports
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