That’s the new world order as the coronavirus called Covid-19, which has been classified as a pandemic by the World Health Organization, continues to spread across the globe, causing lockdowns in Italy and elsewhere. In response to the pandemic, President Trump announced on March 11, 2020, that travel into the United States from every European country would be suspended for 30 days. As global economies continue to struggle, businesses such as airlines, cruise lines, and hotels in the consumer discretionary sector are getting hit the hardest. 

Consumer discretionary spending, also called consumer cyclical spending, refers to spending on non-essential items such as vacations, jewelry, or cars, and it depends on economic cycles. When the economy is in good shape, more people are generally working, wages tend to rise, and more money flows through the economy. As a result, people tend to spend more on discretionary items.

In contrast, when times are tough and the economy slows or is contracting, people will reduce their spending on discretionary items, while they continue spending on the stuff they need, such as groceries, toilet paper, and toothpaste, known as consumer staples.

Global economies respond to the coronavirus

More than 5,600 cases of the virus have been reported and more than 90 people have died in the United States, where markets have tumbled since the end of February. On March 12, 2020, markets experienced their worst day since October 19, 1987. 

The Dow Jones Industrial Average fell 10% and the S&P 500 dropped 9%, entering a bear market on March 11, 2020. A bear market is defined as a period when prices on an index fall 20% or more from a previous high, perhaps after a bull market. The S&P 500 had previously been in a bull market since 2009, in the middle of the recession. 

Industries hurt by the pandemic

Globally, airlines are expected to lose $113 billion in response to the pandemic, with airlines in Asia Pacific expected to lose roughly $58 billion.

More than 6,700 flights are expected to be disrupted by the ban. Delta Air Lines and United Air Lines are expected to be the most affected. American Airlines announced that it would cut 75% of international flights in response to the travel ban while Delta said it would reduce flight capacity by 40%. United will reportedly reduce flights by 50%.

U.S. airlines are also seeking a $50 billion bailout.

As cruise ships have become a breeding ground for the virus, several cruise lines have suspended business.  Princess Cruises, owned by Carnival, announced that 18 of its ships would stop operating for two months. Viking also announced that it would cancel ocean and river cruises until May 1st. 

With people traveling less, the hotel industry has also experienced a dip. Hotel chain Hilton projected a loss in revenue between $25 and $50 million dollars as a result of the virus, according to the Wall Street Journal. Shares of hotel companies including Hilton, Hyatt, and Marriott have fallen during the pandemic. 

The coronavirus has also had an impact on the sports and entertainment industries as many events in which large groups of people are expected to gather have been canceled. The National Collegiate Athletic Association (NCAA ) canceled its annual college basketball tournament March Madness due to the virus, while the National Basketball Association (NBA) canceled the remainder of its basketball season. Golf’s Masters Tournament, which was to take place in April, has also been postponed. 

Movie premieres including those of the new James Bond movie No Time to Die, A Quiet Place Part II, and Mulan have been postponed. Disney also announced that it would close all of its parks amidst the pandemic.

Cities such as Los Angeles, New York, and Seattle have shut down restaurants, bars, movie theaters, and gyms to curb the spread of the virus. New York governor Andrew Cuomo also suspended shows on Broadway in New York City as gatherings of more than 500 people have been temporarily banned. 

Silver lining?

While no one is really doing well during the global downturn, some businesses are finding an opportunity. Grocery delivery company Instacart reported that sales increased 10% at the end of February. Demand for consumer goods such as toilet paper and cleaning products has increased so dramatically that some stores have limited the sale of certain products.

Here’s a look at some other industries:

• As more people work from home, employees may need to use video conferencing technology. People have spent 5.5 million minutes in meetings in March 2020 on Cisco’s video conferencing platform, according to CEO Chuck Robbins.
• Biotech companies are racing to develop and test a vaccine for the virus. One such company, Moderna, has shipped a vaccine to the National Institute of Allergy and Infectious Disease. Testing of the vaccine began on March 16, 2020. The Food and Drug Administration (FDA) also granted emergency approval to pharmaceutical company Roche Holding AG’s test which may allow widespread testing for the coronavirus. 
• While many entertainment companies are dealing with rescheduling production of shows and movies, streaming services such as Netflix are expected to see a boost in customers as more people are staying indoors to avoid the virus. In fact, on March 13, 2020, the 1995 movie Outbreak about a virus was the 9th most popular movie streaming on Netflix in the U.S.

More on the coronavirus 

Since the coronavirus first appeared at the end of 2019 in Wuhan, China, the virus has spread to 163 countries, infecting more than 189,000 people and killing more than 7,500 people globally. 

The coronavirus pandemic has slowed production and hurt businesses in China, where the virus originated, and beyond. In the first two months of 2020, China’s industrial output declined by 13.5% and retail sales decreased by 20.5%, according to Reuters. Companies including Tesla, Apple, Starbucks, and Ikea temporarily halted their operations in China during the worst of the outbreak there. Meanwhile, the entire country of Italy is under lockdown.

In the United States, companies including Facebook, Google, Amazon, and Twitter have urged or required employees to work from home and leaders have asked people to socially isolate themselves.

Investing during the pandemic

In times of volatility, it’s best to maintain the Stash Way by diversifying your portfolio to include a mix of stocks, ETFs, and bonds. And keep in mind that investing small amounts regularly and focusing on the long term are also important parts of the Stash Way.

Remember that you can invest in single stocks and ETFs in consumer goods, retail, biotech, healthcare, and more on Stash.

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