Nigel Hawkins, Hardman’s Infrastructure and Renewables Specialist, analyses how the COVID-19 pandemic has impacted both stock markets in general and certain sectors in particular. Whilst the FTSE-100 has regained around half of the loss it sustained in March 2020, many sectors still remain very weak.
As expected, defensive sectors have outperformed a falling market, with utilities (Centrica aside) being particularly resilient. Other traditional defensive sectors, such as food retailing and pharmaceuticals, have also performed solidly. By contrast, retail, leisure, travel, hotel and hospitality businesses continue to face, with a few exceptions, immense challenges.
Dividend payments have also been slashed across the board, most notably by oil companies and banks – both crucial dividend paying sectors for income funds – and their share prices have responded accordingly. In particular, Shell’s 66% dividend cut – the first since the end of WW2 – has been seminal.
Significantly, many major US stocks have done far better, with the combined market value of Apple and Amazon now exceeding an astonishing $3,800bn – shares in both stocks are up by over 60% during the last six months.
More generally, COVID-19 has also brought about many fundamental trends ranging from a massive boost for online retailing to major declines in demand for office space and the associated commuting that has sustained it for generations.