The recent coronavirus outbreak has caused panic in the stock markets and unfortunately, little central banks have done has helped calm investors’ nerves. It’s perhaps not surprising that some industries have been hit harder than others. Here are five industries I’ve noticed which have been hit particularly badly.
Airlines and travel
This one is a bit of a no-brainer. These industries were amongst the first to see their share prices fall when it became clear that coronavirus was to be taken seriously. Companies such as EasyJet and International Consolidated Airlines, the owner of British Airways, have seen share prices plummet over fears of travel bans, holidaymakers not booking summer getaways. The one silver lining is one of the biggest costs for airlines, oil, has decreased in price.
Share prices of BP and Royal Dutch Shell have been hit by an unfortunately timed spat between major oil producers Saudi Arabia and Russia. Unable to agree to reduce supply both oil-producing nations have promised to ramp up production. This has massively deflated the oil price. Alongside the worsening global economic picture, this has hit share prices of oil producers. Those producers carrying large debts, or with high operating costs will be in particular trouble if conditions remain like they are currently are for an extended period of time.
Housebuilders, in particular, seem to have seen their share prices fall heavily since the outbreak of coronavirus. Part of the reason may be investors locking in gains from share price rises pre the market fall and a second reason would be fears that in poor economic conditions fewer people will want to take on big mortgages to buy a house and that’s if banks are willing to lend as much.
The share prices of Lloyds and Royal Bank of Scotland have been battered. Talk of mortgage holidays to help the economy during the coronavirus pandemic won’t help these shares. Nor will stock markets falling and interest rates being slashed. It’s a bit of a perfect storm for banks and the share prices have suffered as a result.
The balance sheets of many high street retailers weren’t in great health anyway. Laura Ashley, for example, has gone into administration and it seems likely there will be other casualties if the economy takes a turn for the worse. People self-quarantining may boost online-only retailer potentially but it’s going to do no good to retailers with large numbers of stores, who were struggling even when the economy was doing well.
These aren’t the only sectors struggling but it seems to me they are particularly cyclical and a large number of companies that are in these industries are seeing their share prices amongst the worst hit.
On the opposite hand, far less value has been wiped off companies considered defensive. Pharmaceuticals, utilities and grocers would be examples of these. Demand for their products will go on regardless of the wider economic picture.