Without question, the novel coronavirus defined the global investment sector. Due to unprecedented lockdowns across major world powers, economies everywhere ground to a halt. But as we head toward the second half of 2020, any stock market forecast will center on the theme of recovery: how quickly, how robustly, and most importantly, which sectors?
So much has changed in our paradigm that it’s impossible for a relatively short article to cover all the nuances. As well, multiple variables exist as to the direction the global economies will take. However, I believe that certain publicly traded companies offer distinct insights regarding the health and demand of their underlying industries.
For this stock market forecast, I will focus on organizations linked to sectors that face either significant or surprising changes. Thus, I’m not going to talk too much about companies like Amazon (NASDAQ:AMZN). With a pandemic, e-commerce has bolstered the consumer economy while physical retailers faltered. Very likely, if we have another wave of coronavirus, AMZN should do well.
Frankly, that’s not much of a stock market forecast. Therefore, I won’t waste your time (at least that’s the intention) with low-hanging fruit. Instead, I’d like to talk about these 10 companies, which may provide us a critical clue for their underlying sectors:
- Boeing (NYSE:BA)
- Lockheed Martin (NYSE:LMT)
- Newmont (NYSE:NEM)
- Sturm Ruger (NYSE:RGR)
- Axon Enterprise (NASDAQ:AAXN)
- Nikola (NASDAQ:NKLA)
- Alibaba (NYSE:BABA)
- Clorox (NYSE:CLX)
- Beyond Meat (NASDAQ:BYND)
- AMC Entertainment (NYSE:AMC)
Finally, let me note that the stocks below are not necessarily buy nor sell ideas. Instead, for the purposes of this discussion, please treat these names as potential forward indicators. From there, you can make your decisions.
Now, let’s get into it with my stock market forecast for the second half of 2020.
In my opinion, the destruction of Boeing shares was emblematic not just of the demand collapse on Wall Street but rather, the unexpected humbling of this nation. You see, Boeing literally destroyed empires with its fleet of feared bomber aircraft. Now, BA stock was on the wrong end of a bombing and not necessarily by competition.
Indeed, you can make the case that hubris contributed to Boeing’s downfall this past March. Utilizing stock buybacks to enrich executives and other stakeholders, the company was doing just fine in the bull market. But now, such actions have come back to bite them in the rear, leaving management to beg for a bailout.
But to be fair, it’s not just hubris that tanked BA stock. Obviously, the biggest concern is airliner demand. And that depends entirely on travelers’ appetites. Should Wall Street see a substantive improvement ahead, BA should continue its present recovery rally.
If not, I don’t need to complete the thought. But because this is such a pivotal name, you should consider it a key barometer for any stock market forecast.
Lockheed Martin (LMT)
According to an oft-cited adage, there are only two guarantees in life: death and taxes. Regarding the former, we humans do a great job delivering that to our neighbors. Thus, defense contractors like Lockheed Martin will always play a relevant role in any stock market forecast. Namely, if we anticipate further geopolitical tensions, LMT stock should rise in prominence.
Of course, Lockheed Martin shares plummeted soon after the coronavirus gained momentum in the U.S. Frankly, I’m not surprised. With all eyes focused on the pandemic, no one had time to kill each other. Instead, most normal people were worried about an invisible, non-human assassin lurking everywhere and nowhere.
But in the second half of March, LMT stock quickly picked back up. In part, geopolitical tensions never died down, with the most conspicuous example being the oil price war between Saudi Arabia and Russia. Additionally, our adversaries on the world stage – Russia, China and Iran, to name a few – never took a break. They used the pandemic to test our military’s readiness.
Moving forward, I view Lockheed as a critical, though a somewhat underappreciated component of my stock market forecast. While the headlines are screaming about Covid-19 and President Trump’s latest social media post, North Korea blew up its southern neighbor’s de facto embassy. Also, a hot conflict sparked between India and China.
Certainly, this is a space to watch no matter who you are.
As one of the world’s biggest gold producers, Newmont offers significant relevance at this time. Obviously, with fears of economic instability still on the minds of every American, many investors have sought the relative safety of gold. Also, with social unrest sparking not just in the U.S. but across the globe, having some exposure to NEM stock makes good sense.
As part of this stock market forecast, I’m very curious where Newmont heads in the second half. From my perspective, the contextual situation is only worsening. For instance, I appreciate that state reopening measures have allowed the economy to gain 2.5 million jobs in May. But can businesses like restaurants survive on limited capacity when their rent is still charged at 100% capacity?
I doubt it, which is why I’m bullish on NEM stock. Moreover, we’re still not over the coronavirus pandemic. According to the Centers for Disease Control and Prevention, new daily infections have noticeably spiked. Also, nearly 20,000 Americans have died since we crossed the macabre six-digit level.
That implies further pain (at least for specific sectors like travel) until we can somehow contain the disease substantively. Thus, NEM provides a great read for a second-half stock market forecast.
Sturm Ruger (RGR)
Ordinarily, firearms companies like Sturm Ruger appeal to a very niche segment of society. Weird people like me. However, Ruger historically has acted as a valuable stock market forecast in terms of gauging political sentiment. Now, the company and the entire sector has witnessed an unprecedented demand surge that should serve RGR stock well.
This time, we’re not just talking about the fear of Democrats driving conservatives to buy guns and ammunition. Rather, concerns about social breakdown has caused a wide range of demographics to exercise their Second Amendment rights. As I detailed for InvestorPlace, Asian Americans initially bought guns in droves. Later, economic and social upheaval sent everyone to their local firearms retailer. Let me share with you some staggering statistics that I compiled:
According to the FBI’s database, gun dealers submitted over three million firearm background checks in May. This generally corresponds to the total number of guns sold in the month, although keep in mind that federal law does not require private sellers to initiate such checks. Even so, retail sales of firearms from January through May is staggering at over 15.2 million units.
To put this figure into perspective, in all of 2009, Americans bought just over 14 million firearms. And that was when former President Barack Obama took over the White House. Thus, the case for gun stocks to buy is very much a bankable phenomenon.
Unfortunately for my liberal and Canadian friends, I don’t think the sentiment driving up RGR stock and similar investments is a fluke. And while you may not agree with guns, you should at least consider this sector to refine your own stock market forecast.
Axon Enterprise (AAXN)
A somewhat related name to Ruger, Axon Enterprise is most notable for its taser, which is an electroshock self-defense tool. Commonly, you’ll find law enforcement officers deploy them when they wish to apprehend a violent suspect who hasn’t quite met the threshold of requiring lethal dispatching, to use clinical language. However, tasers also provide peace of mind for civilians, who may not wish to kill another person but also desires an effective weapon.
Thus, AAXN stock is a relevant name during this time of social turmoil. But my interest in Axon goes far beyond the self-defense realm. Recently, calls for defunding the police have stemmed from reports of officers utilizing excessive force. To prevent such measures from becoming a wider practice, law enforcement agencies need accountability from their service members. And that’s where Axon comes in.
More than just a taser company, Axon develops body cameras. Increasingly, this platform will be crucial as everyone across the political aisle discuss effective police reform. Therefore, Axon represents a political indicator in this stock market forecast.
But will AAXN stock benefit from the underlying company’s products? I believe it will because of the many uncertainties in our society. But no matter what, keep an eye on it as it offers insights into our political discourse.
Easily one of the most explosive companies in the first half of this year, Nikola took the world by storm. Mainly, it had the gall to directly compete against Tesla (NASDAQ:TSLA), introducing a gorgeous electric-powered pickup truck. Whereas Tesla’s Cybertruck looks like a high school geometry question that grew wheels, Nikola’s pickup looks like a genuine vehicle.
Plus, the thought of getting aboard another Tesla was more than enough to shoot NKLA stock to the moon. But that’s just one reason why you should consider Nikola for your own stock market forecast.
Really, Nikola could be the most devastating and ironic competitor that Tesla has ever known. Let’s face it – if Tesla made a combustion-engine vehicle, they would never be able to touch automotive giants like General Motors (NYSE:GM) or Toyota (NYSE:TM). So, they did the ingenious thing by changing the rules altogether with electric vehicles.
Primarily, the advantage to EVs is that they’re much easier to make than traditional cars. Thus, Tesla was able to “troll” the snot out of the big automakers. But you got to figure that this is a double-edged sword. If someone else makes an equivalent EV, how would the consumer react? Are they buying the brand or the technology?
If the latter, Nikola makes an excellent case. Clearly, the technology is easy (or easier) to duplicate. And that’s the driving force behind NKLA stock. Of course, Nikola could flop if consumer forecasts are wrong so tread carefully.
In any other circumstance, analysts would view the pros and cons of Alibaba based on its business. Widely regarded as the Amazon of China, Alibaba is essentially the Asian juggernaut’s flagship company. Of course, if you’re interested in BABA stock as an investment, you should carefully study its fundamentals. But for our purposes here, I think the company offers tremendous value as a stock market forecast.
Naturally, I find it interesting that BABA stock has performed very well since its March doldrums. Even though China went into lockdown during their coronavirus outbreak – sending shockwaves to the global markets – the nation’s subsequent recovery efforts have been encouraging.
Moreover, Alibaba shares provide a real-time indicator for China’s economy. Yes, we can glean much information from broader industry-level data. However, they’re all in the past. With BABA stock, you’re looking at what most investors believe about the company’s future. Again, with Alibaba being the flagship of China Inc, its pricing provides a meaningful take as a stock market forecast.
Also, I’m curious about the appetite for Chinese-related investments in the second half. Will America and developed nations still be bitter about the coronavirus? It’s an intriguing question, one to which Alibaba may offer important clues.
When the pandemic first significantly impacted Americans, everyone rushed for mitigation platforms. That’s an incredibly nerdy way of saying that you couldn’t find Clorox products to save your life. Not surprisingly – although it did require some suspension of disbelief – CLX stock took off like a high-flying tech startup.
But with months-long shutdowns flattening the curve, Clorox doesn’t seem quite as pertinent. However, I think this is an optimistic view. Thanks to a possible combination of states reopening their economies and nationwide protests for social equity, cases have flared up. According to ABC News, coronavirus-related hospitalizations have increased in 17 states, while deaths have increased in 13.
Before you send an angry email to my editor, this does not mean it’s time to panic. However, it may mean that the infection curve nominally is unflattening itself. Also, it doesn’t matter what you or I think. Instead, consider the millions who consume mainstream media reports.
If they panic, guess what? You’ll probably see CLX stock moving higher.
For what it’s worth, it seems Wall Street is anticipating a second wave. CLX stock has performed remarkably well over recent sessions. If you want a stock market forecast related to second wave probabilities, this might be it.
Beyond Meat (BYND)
Usually, market disasters are bad for all businesses. But for Beyond Meat, the pandemic gave the plant-based meat company a critical lifeline. Due to a huge impact to the food supply chain that particularly impacted the traditional meat industry, consumers were left with few options. Moreover, the ones that were available were priced higher to accommodate the disruption.
Naturally, BYND stock took off like a rocket in this uniquely favorable environment (from their perspective). Now, the question is, can shares maintain this momentum?
It’s a tricky topic to discuss. On one hand, with states reopening their economies, the prospects for traditional food players should improve. Also, because we’re in a severely deflated jobs market, it behooves workers to return to their posts.
But on the other hand, the meat industry has vulnerabilities to widespread infections. As you might expect, it’s difficult to maintain social distancing. Plus, it’s an unsavory job in the best of times. If coronavirus cases spike over the long term, this may be advantageous to BYND stock.
But I also question the consumer appetite for plant-based meat. For example, many if not most consumers acknowledge that fake meat smells bad. Frankly, I find this peculiar as smell is the first tool we use to determine if food has gone bad.
Nevertheless, I’m not saying buy nor sell here. Rather, use BYND as a stock market forecast pegged to consumer behaviors.
AMC Entertainment (AMC)
The last stock to watch in my stock market forecast is AMC. If you want the litmus test of consumer behaviors in the new normal, AMC Entertainment may be the ticket. Yes, you have other platforms from which to choose, most notably the airliners. But with this category, you have some plausible deniability at work. In other words, some people may have to travel. However, there’s no critical reason to watch a movie with hundreds of strangers.
So, everyone will look on with curiosity as the cineplex operator reopens 75% of its theaters in July. Apparently, most investors believe in the recovery narrative for AMC stock, with shares jumping from its April lows. But opening the box office is one thing; will moviegoers come out to watch or will they stay inside and binge on Netflix (NASDAQ:NFLX)?
Again, this is a tough one to call. Some of the most highly anticipated films have been pushed back toward the holiday season or to next year. That leaves Disney’s (NYSE:DIS) “Mulan” to kick things off regarding new releases.
From the perspective of a stock market forecast, AMC is fascinating. If “Mulan” does very well, it suggests that anti-China sentiment has faded significantly. It also sets up a strong argument for AMC stock as the true blockbusters are lying in wait.
Of course, it could all go belly up if the opposite is true. Therefore, if you’re a conservative investor, use AMC as a gauge, not a gamble.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he is long gold, NKLA and AMC.