The economic climate in 2020 has been… unexpected, to say the least. The arrival and subsequent devastation wrought by the novel coronavirus has sent markets into a volatile ride that no one could have foreseen.
But all that is behind us now. What lies ahead is fairly predictable. And a predictable market is one that you can profit from, with the top stocks available.
So what is the market telling us right now? Well, that’s it’s still in panic mode—to an extent.
Yes, the worst of the economic fall is more than likely over. But also true is that the market is particularly vulnerable right now.
Many medical experts are warning of a second wave of COVID-19 cases that could wreak havoc on the American and global populations. That risk is only intensified by the fact that many states and cities are reopening. The chances of a second surge in cases, therefore, is, if not likely, certainly a strong possibility.
In that event, we can expect Wall Street to once more enter panic mode. The market isn’t all that great at anticipating falls, and is more prone to be a reactive force.
The reason for that is pretty simple: while one investor may think they know which way the market is trending, they have to take into consideration the possibility (in fact, likelihood) that many others will panic and thereby send markets racing downward.
That thinking leads to well-informed investors making panic sales in order to avoid being trampled underfoot by the herd rushing to leave the market.
It’s the unfortunate reality of the market that, no matter how well-informed you may be, you always have to account for how the market at large will react.
So that brings us to what the market is telling us right now.
Many people are fleeing to money-market funds that only invest in highly liquid assets. This signals that they believe volatile upheaval is on the way. We’ve seen assets in money-market funds rise to $4.6 trillion as of late. According to one study, that’s the highest value on record. (Source: “Investors Are Sitting on the Biggest Pile of Cash Ever,” The Wall Street Journal, June 16, 2020.)
So what does that mean for the average investor? Well, it means that the market is still concerned about the unpredictability of the future of the markets. But it also means that a huge portion of cash is being sat on, and it can be withdrawn easily and reinvested when the time is right.
Much like what I said before the economic downturn, the move here is the same: either buy and hold, knowing that a recovery is on the way, or—conversely—those seeking to maximize profits could sell and wait for another collapse, buying low and seeing strong profits during the recovery.
While the buy-and-hold strategy is perhaps the safer of the two (as we don’t know if a collapse is imminent), ultimately the market is readying itself for another collapse and is signaling that it’s ready to buy up stocks in a big way, should the opportunity present itself.
Being able to outpace the market and buy just before the money floods back in means an investor could see huge gains in that time period.
All that’s left is to choose the top stocks.
The Industry With the Top Stocks Right Now
In my mind, there is one industry that seems better suited than all others to weather the storm that may be approaching from another COVID-19 spike: technology.
I’m almost always bullish on tech stocks. After all, tech stocks are the best way to bet on progress and development, something humans are hardwired to constantly pursue.
Having said that, tech stocks are the top stocks in my opinion because the novel coronavirus really can’t affect them all that much. Which isn’t to say that an economic downturn won’t decrease sales, of course. What I mean is that the long-term outlook of tech companies will remain positive for a while yet despite another economic slowdown.
Why? Because they were already geared toward products and services that are going to be used with increasing regularity for the next five to 10 years. A collapse of the stock market for a few months or even a whole year wouldn’t be strong enough to derail those long-term projections.
Getting even more specific, the top stocks in the tech industry are chip-maker stocks and 5G stocks.
Both involve technologies that are set to see a huge increase in usage in the coming years, as well as hold the potential to radically improve the technologies and structures that are in use today.
In other words, these are very strong industries with well-positioned outlooks, stock market falls be damned.
Chart courtesy of StockCharts.com
Just look at the chart above. It lists some of the best chip-maker stocks and 5G stocks available. Both of these types of tech stocks saw falls during the worst of the economic collapse, but then showed hard rallies toward extreme growth in the immediate aftermath.
Should another collapse be on the way, I anticipate that we’ll see the same thing play out once more: a fall followed by a strong rally.
That gives investors two options: one is to buy and hold, knowing that a potential fall is in store, but also knowing that these stocks are well positioned for years to come and therefore can weather the storm.
The other involves keeping cash on hand and waiting for the next fall (should it come). Buying at the nadir could easily net investors 50%-plus gains in a matter of months if timed well.
Those who see the market and panic are missing the forest for the trees. Yes, there are trends to be concerned about and prognostications that are pretty dire, but overall the market has proven that it is more than capable of adjusting and recovering from coronavirus-related issues.
As such, tech stocks like chip-maker stocks and 5G stocks are likely to see surges in price whether there’s a stock market collapse or not, marking them as some of the most reliable stocks out there in these most unreliable of times.