The COVID-19 pandemic, along with the oil price crash due to the price war between Russia and Saudi Arabia, negatively affected almost all industries. Some of them are already at the edge of where they will never recover. According to USA Today, this year may be one of the busiest ones for Chapter 11 bankruptcy filings since the Great Recession. Let’s determine which industries may become a safe haven for investors and which ones are not likely to return to their previous positions.
Difficult to Recover
We will begin with the industries that have been suffering the most. According to analysts, it may take more than five years for the sectors under the most significant pressure to return to the levels of 2019.
Oil and Gas
As we mentioned above, oil prices plunged due to the conflict between Russia and Saudi Arabia. The value of the WTI benchmark fell below 0 for the first time in history. At the same time, almost every country in the world imposed restrictions on the movements between countries and even within the state. Air traffic has decreased significantly; people stay at home and use their cars much less than before. Public transport was closed or limited in many countries as well.
The decline in movement leads to limited fuel demand. As a result, many oil and gas companies have filed for bankruptcy protection. For instance, Sable Permian Resources Finance, Chesapeake Energy, and Extraction Oil and Gas have all undergone the filing process. Currently, the largest US banks actually gave up lending to suffering oil and gas companies.
Such giants as Citibank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo almost simultaneously canceled investments in the oil and gas industry. Thus, experts predict more bankruptcies of oil and gas companies.
Although OPEC+ member-states have been trying to push the price up, it’s difficult due to COVID-19. It seems the industry may recover as soon as countries open their borders. Nevertheless, rumors about the second wave of coronavirus indicate more challenges for the oil and gas industry.
The weakness of the oil and gas industry interconnects with the aviation sector. Above, we talked about the reduction of movements between countries and cities. International airlines have been dealing with massive layoffs. Although local governments support the industries with benefits packages, it’s not enough to keep employees. Such giants as Lufthansa, LATAM Airline Group, and KLM had to apply to government support and reduce their workforce.
Though some states have eased the lockdown, it’s unlikely the industry will recover soon. The recovery of flights hasn’t encouraged the airlines yet as material losses exceed profits dramatically. If borders close again, more airlines will become bankrupt.
Although the reason why retailers have been going through challenges is apparent, still, no one could expect that leading companies such as J.C. Penney, and J. Crew Group Inc. would file for Chapter 11 bankruptcy protection. For example, J.C. Penney has been negotiating the business plan with its lenders to prevent the company from liquidation. The firm has to close nearly 152 stores and fire 1,000 workers.
Lots of people lost their jobs because of the coronavirus. As a result, their income plunged. People began purchasing fewer clothes and accessories. However, it could be expected that leading retailers will survive due to online sales and discounts to allow customers to buy goods at a lower price.
Nevertheless, retailers had to close most of their stores and fire many employees. It’s worth mentioning that other factors besides the pandemic led to bankruptcy filings. However, COVID-19 became the trigger for such procedures.
The Safest Industries to Invest In
We have considered the industries that suffer the most from the coronavirus pandemic. But what about those that may bring suitable investments even in times of crisis? Let’s see what industries are wise to invest in today.
Although the healthcare industry has suffered from the pandemic, people will still need medicine no matter what happens. Moreover, many biotech and medical companies have been working on the COVID-19 vaccine. Thus, the industry may recover soon.
Technologies may expedite the recovery process. Artificial intelligence that will improve medical tools and help doctors reduce labor costs may contribute to the industry’s recovery.
We mentioned artificial intelligence, which directly relates to the tech industry. Almost all tech companies, such as Google, Visa, Mastercard, and Amazon, have been suffering the smallest losses. Technologies help them adapt to current conditions. People move to online payments; home delivery becomes more popular. Although losses are inevitable, tech companies will go through the crisis easier than firms of other industries.
New Industries to Invest In
What about new industries? Do they have a chance of outperforming after the crisis ends? Some experts talk about electric cars that may be one of the growing industries to invest in. Despite the fall in the car industry, in March, the number of battery-powered vehicles in Europe increased by 23%. Then, the profits of the sector also declined but less than that of the traditional one. Currently, it’s unclear whether it’s a trend or just a mistake.
There is a chance that start-ups in this industry will hit the market and become promising investments. Nevertheless, it’s better to wait until the industry confirms its resilience to market vulnerability.
To conclude, the ongoing pandemic and the crash of oil prices put many industries on the edge of bankruptcy. Many companies won’t recover anymore. However, there is still a chance for some sectors.
It’s more likely healthcare and tech companies will continue to outperform even if the second wave of coronavirus hits the markets. Currently, they are the safest industries to invest in. Electric cars may become a new industry to consider investing in. However, the confirmation of its resilience is necessary.
If you are still in doubt about where to invest, Einvestment experts will provide reliable advice and create a profitable portfolio.