Since the start of the coronavirus crisis, investors have been asking all kinds of questions.
How fast can we develop a cure?
When will we be able to resume our daily lives?
And how long will it take for the economy and the stock market to recover fully?
That last question has been a particularly hot topic of discussion. Especially, what type of recovery are we looking at?
A V-shaped, a U-shaped, or, god-forbid, an L-shaped recovery.
All outcomes have solid arguments behind them. But if you ask me, it will be neither of them.
Because there’s another type of recovery that’s far more likely—a W-shaped.
A W-Shaped Recovery Is The Only Type That Makes Sense
At the onset of this crisis, my argument was that we would most likely experience a U-shaped recovery.
That is, experience an initial drop, face a prolonged period of crisis, and then move sharply higher towards the end of the year as the economic stimulus takes hold.
This is a much more reasonable scenario than a V-shaped recovery, which is overoptimistic, and an L-shaped one, which is too pessimistic.
The problem with my initial prediction is that the stock market is not playing along. The rebound from the bottom has been too sharp.
But this doesn’t mean that I am convinced that the worst is behind us. I still believe we will see another decline happen over the next couple of months before the real recovery happens, hence the letter W.
At this point, stocks are too expensive, which in itself poses a significant risk. It’s a topic I’ve already covered, and you can read more about it here.
Furthermore, while the news has been mostly positive up to this point—the unprecedented economic stimulus, the infection curve flattening, the FDA approval of remdesivir—we still don’t know the extent of the economic damage caused by the prolonged lockdown.
This is a serious matter, which the market isn’t accounting for.
Just look at this jobless claims chart and tell me the recent stock market rally is justified.
It doesn’t make any sense.
Which is why I advise you to keep playing it safe.
In Uncertain Times It’s Best To Invest With Certainty
Overall, this is an incredibly difficult market to invest in. Even for experienced professionals like myself.
But, that doesn’t mean all opportunities are gone.
There are still trades which pose little downside risk and offer decent upside potential.
One sector that I suggest you consider is healthcare.
It’s not as dependent the underlying economy since health is one of the costs consumers spend on no matter what.
Moreover, because we’re dealing with a health crisis that experts agree will drag on well throughout the next winter, companies in this sector can expect their revenues to increase at a faster pace than the rest of the market.
And finally, the aging population makes healthcare one of those long-term megatrends, which will continue to grow well beyond the coronavirus outbreak.
What’s not to like.
This is why in this month’s True Retirement Wealth issue, I focus on a healthcare company.
Best of all, the stock is currently trading 10% below where it should be, making this a perfect time to buy it.
You can grab your copy here.
The issue goes out tomorrow.