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Benefit from the crisis? : How best to invest your money in times of coronavirus

The coronavirus crisis has plunged many stock exchanges worldwide into a downward tumble. The Dax, for example, has fallen by a good 15 percent since its high on February 19 in a very dynamic and rapid mini-crash. In the USA, the major indices fell by a similarly strong point, with the Dow Jones losing more than 4,100 points within a few days. That corresponded to a loss of 14 percent.

Investors have not seen such massive sell-offs since the financial crisis. Investors around the world are worried and ask themselves numerous questions: What's next? What does this mean for your own money? Does Sales Make Sense? How can you benefit from the crisis? Is gold still a safe haven? Here is a brief overview.

There is a threat of further price falls

After a sharp downward slide in the previous week, the markets initially calmed down with the expectation that the US Federal Reserve could cut interest rates. But when she did it unscheduled on Tuesday, it tore the markets down again.

Investors were skeptical that the Fed hadn't even waited until the regular March 15th meeting. “What if the Fed sees more risks than the markets,” writes Christian Scherrmann, economist at the DWS fund company, in a current assessment. The OECD is also sounding the alarm: If the corona virus spreads further, the euro zone could slide into recession. This would not remain without consequences for the markets.

Deutsche Bank differentiates between a base and a worst-case scenario. In both cases, the downward slide would not be over, but could end up 20 or even 30 percent down. For the Dax that would mean: From its high at 13,789 points, it would fall at 20 percent minus to 11,031 points, at 30 percent even to 9652 points.

However, it is also conceivable that spring, with warmer temperatures, will keep the virus in check, and that the number of diseases and economic consequences will not get out of hand. The indices recovered somewhat yesterday. Nevertheless: In any case, the virus is likely to leave its mark on the balance sheets.

Sell ​​or sit out?

Which strategy makes more sense depends on the investment horizon. Anyone who is short-term oriented must know that their portfolio can slide further into the red. If you think long-term, you can sit out the virus - or even buy it cheaper when you dive into the markets again.

However, it has been scientifically proven that “market timing”, that is, the attempt to find the best time to exit and the most favorable time to enter, is at most lucky for the lucky ones. Therefore, investors who need the money in the short term should primarily sell.

Securing the depot

If you are concerned, you could secure your portfolio with stop rates. To do this, you have to trigger a sell order for each position, but this is only realized at a certain, lower-lying point. Put warrants are an alternative. They rise when the market falls and thus secure the portfolio.

Large indices that match the investment regions in the portfolio are suitable as base values. However, hedging has its price: if, contrary to expectations, the markets do rise, the money is gone.

Loser of the corona crisis

So far, travel companies, airlines, hotel chains, cruise lines and car rental companies have suffered the most. But mechanical engineers, car groups and pharmaceutical companies with suppliers from China are also badly affected. Hotels and car rental companies in Germany sometimes complain of massive drop in bookings. This year, the travel and mobility industry could be missing a larger portion of the roughly $ 300 billion that the Chinese spend each year traveling around the world.

The rest of the world is also partially foregoing mobility. Event companies and caterers are complaining about the cancellation of three quarters of their bookings, car companies are suffering from a drop in sales of up to 80 percent in China due to lower sales. Hotels in Asia are often empty or have very little occupancy.

All of this can be seen in the share prices: A corona break of 30 percent since mid-February weighs on the Lufthansa share, and the situation is similar with other airlines. The course of the travel company Tui has since collapsed by 40 percent. Many globally active companies have already cashed in on their sales targets, for example Microsoft, or are expecting a slump in profits, such as the world's largest beer brewer AB Inbev, to which brands such as Budweiser and Stella Artois belong.

Opportunity to board

Many stocks that have fallen sharply are suffering from a presumably temporary sales shock, which could calm down again as the year progressed. Eleven of the 30 Dax shares and 20 of 50 papers in the EuroStoxx 50 are now between ten and 25 percent cheaper than they were four weeks ago. MTU Engines, for example, engine manufacturer from the Dax, has fallen from 287 euros to 217 euros since January 24th.

The shares of companies that have recently presented very good figures and do not see any negative effects from the corona virus have also plummeted. This applies, for example, to the share of the reinsurer Munich Re. Nevertheless, the following applies: The prices do not evaluate the status quo, but the future - and thus contain all kinds of worries. Overall, however, stocks are currently significantly cheaper than they were two or three weeks ago.

Consequences for funds and ETFs

Since funds divide the risk across many stocks, they are on average better protected than individual securities. Actively managed funds can also increase the cash quotas and wait for a downward slide with more cash in the portfolio in order to then re-enter more cheaply.

However, active funds also face the challenge of having to guess the right time to re-enter. ETFs map the market directly, so they will participate in a downward slide as well as a possible return to rising prices.

Beneficiaries of the crisis

Energy values ​​are particularly unimpressed by the corona virus. RWE, for example, is the only company in the Dax that is positive in the weekly review. Eon was also only sold moderately. The picture in the EuroStoxx 50 is similar: Iberdrola, one of the largest energy groups in Europe, like Enel, have saved themselves best over the market turbulence.

The prices of companies that produce the medical protective equipment that is now required worldwide have risen massively. Alpha Pro Tec, a Canadian manufacturer of protective equipment and masks, has exploded 320 percent since February 12. Paul Hartmann AG, the parent company of Bode Chemie, the manufacturer of the most widely used disinfectant Sterillium in German medicine, climbed from 290 to 334 euros within a week.

Pharmaceutical and biotech companies working on the development of vaccines are also among those profiting from the crisis, such as Novavax. The share of the small US biotech company rose from 3.50 to 14.40 euros since January 13, until investors realized that many companies around the world are working on a Covid vaccine. The paper therefore went back to 9.85 euros.

The diagnostics specialist Qiagen, which has just started shipping coronavirus test kits worldwide, and pharmaceutical companies with potential drugs against the coronavirus also clearly benefited. Roche, Abbevie, Johnson & Johnson and Gilead Sciences with the as yet unapproved Remdesivir have potentially effective drugs. The first clinical tests of Remdesivir are already underway, and Gilead shares are up a good eleven percent on a monthly basis.

Fund savings plans and gold

For investors with fund savings plans, the crisis can also have positive aspects. Because those who regularly invest fixed sums now receive more shares for the same money because of the significantly lower prices. So by acting countercyclically, it reduces its average entry price.

A small proportion of the popular crisis currency gold, around five percent of fixed assets, is normally considered a sensible insurance policy. However, unlike stocks, gold does not generate any regular returns and recently barely benefited from sales on the stock markets, but had already risen massively, by around twelve percent since the beginning of December. The US investment bank Goldman Sachs nevertheless assumes that the price of a troy ounce could rise from the current 1642 to up to 1800 dollars in the wake of the coronavirus uncertainty.

Consequences for government bonds

It could be too late by now to get involved in government bonds. The yield on ten-year German government bonds has fallen from minus 0.187 to minus 0.61 percent since the beginning of the year. This reflects a run by investors in the most important German government bond - and the expectation that the ECB could shortly lower its negative deposit rate for banks again to minus 0.6 percent.

Yields on ten-year US bonds collapsed below one percent after the key interest rate cut in the US, after being above 1.6 percent 14 days ago. Conversely, prices have risen sharply. All in all, bonds are now extremely expensive.

Emerging markets as an alternative

The success of this strategy also depends on the individual investment horizon. Depending on the further spread of the coronavirus outside of China, for example in Brazil, where winter is about to begin, individual emerging countries could well come under pressure. The World Bank has just announced, however, that it will quickly give developing countries an initial 12 billion dollars to help them.

The state has apparently also intervened to provide support on the Chinese stock exchanges. In any case, the Shanghai A-Index is back above its pre-crisis level. The Kospi, the leading index from South Korea, the second hardest hit country, is just nine percent lower. In India or Brazil, the minus signs are also much less pronounced than in Europe or the USA. Fund provider Franklin Templeton believes that downside risks in emerging markets can only exist for a very short period of time.

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