Stocks jumped sharply higher on Monday, with the main index rising more than 7% at the end of the trading day. Although the weekend shows that the number of COVID-19 cases continues to increase throughout the world, and the US in particular is heading for a brutal and deadly peak, there is also reason for optimism. In some of the hardest hit countries, there are signs that the worst phase of pandemic growth may end, and that the number of new daily COVID-19 diagnoses, and deaths from disease, will start to fall.
As a result of this glimmer of hope, investors entered the market quickly on Monday. Hotel, travel and hospitality stocks are some of the biggest profits, including the five below.
Monday’s big gains are a big sign of optimism that the worst will soon be behind us. After a few weeks in which the number of newly diagnosed COVID-19 cases has shot higher every day, authorities in Spain and Italy hope that daily diagnoses in these countries will start to fall in coming days, and that the daily mortality rate is also set to the plateau and fall.
There are also hints from a plateau in New York, where Governor Andrew Cuomo said that the number of deaths every day has been “effectively flat” over the past two days. The deadly disease had hit New York harder than any other state, but there might have been little light at the end of the deadly dark tunnel. Cuomo also said that the number of COVID-19 hospitalizations also began to decline, as did the number of people treated at ICU hospitals.
Add it all up, and investors feel hope that restrictions aimed at helping curb the spread of the new corona virus are functioning, and that we are getting closer to returning to normalcy.
It’s nice to see some indication that the terrible amount of COVID-19 can start to decrease, but the trajectory for the U.S. in particular it still shows that the worst is before us.
Every day, the number of new cases diagnosed is higher than the previous day, and the number of deaths is expected to increase sharply over the next two weeks.
When the number of deaths COVID-19 U.S. on the rise, Monday’s optimism could quickly fade, especially as the full economic impact of actions taken to stem the spread of the corona virus became clear. We still at the beginning of this recession – economic data shows we are even in recession is not yet available – and the first dollar of federal stimulus is not even about people’s bank accounts.
It should not be considered as a warning not to buy shares mentioned above. Just a reminder that we are still very, very early in this crisis. There is still no proven medical treatment for this dangerous and highly contagious pathogen, and in the best case, we have more than a year had a proven SARS-CoV-2 vaccine. Without one of these weapons in our arsenal, it is difficult to see the economy – especially travel and resting places – open massively in the near future.
That’s why, for example, Vail Resorts has suspended its dividends, began to embezzle his staff, and withdrew more than $ 500 million from his credit line. That’s why Marriott is reducing staff, even more leave, and drew $ 2.5 billion from its credit line. That is why Expedia withdrew $ 1.9 billion from its credit line.
Despite optimism on Monday, we may still be months away from the day when the hotel or resort chain reopened massively, and air travel is likely to remain massively below its previous level for at least the rest of 2020.
So as much as Monday’s big gains might feel good, investors should take a calm and balanced approach now. The recession we have experienced will likely prove one of the deepest in history, and even with massive government assistance, it will take time to get out of it even after it is safe to restart economic activity that has been paused.
By the way, it’s still the biggest unknown. Even if the number of new COVID-19 cases and deaths increases and begins to recede in the near future, we cannot return to business as usual, or we will endanger millions of people. So be prepared for a decline that can last longer than optimists had hoped, and a recovery that might not arrive as fast as we hoped.
Finally, the hotel industry will return to normal, and I hope that these five companies will survive. I also hope that today’s prices will look like a bargain in the future, but given that they will have little in the way of income or cash flow for the future, the coming months will prove brutal. Invest according to that.
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