Despite yesterday’s drop at the close, bulls are in control this morning. Stocks are up moderately as new coronavirus cases continue to level off.
It seems that social distancing is working.
And according to Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases (NIAID), the outbreak is set to recede after a grisly uptick in deaths this week.
“It’s going to be a bad week for deaths,” Fauci warned.
However, he also added that the U.S. should see the “beginning of a turnaround.”
“So, we need to keep pushing on the mitigation strategies because there is no doubt that that is having a positive impact on the dynamics of the outbreak,” Fauci said.
“Now is not the time to pull back at all. It’s the time to intensify.”
Over 400,000 are now infected in the U.S. and White House estimates had the COVID-19 death toll ranging from 100,00 to 240,000.
If the coronavirus peaks this week, far less will die than expected.
That’s good news for America and potentially great news for investors. Almost every publicly traded company is operating at reduced capacity.
Some are shut down completely.
Those that can’t do business in a COVID-19 world stand to benefit the greatest from an earlier-than-expected victory over the pandemic.
The consumer cyclical sector – home to casinos, cruise lines, restaurants, department stores, apparel brands, and other entertainment companies – could soar in the coming weeks as a result.
And within that sector, a single group of stocks might be approaching a massive breakout – one that will ultimately dwarf most other industries.
Mid-cap restaurant stocks, as measured by the NASDAQ Mid-Cap Restaurants and Bars Index (a real index, believe it or not), are on the precipice of a major “boom.”
With the coronavirus peak in sight, investors are returning to mid-cap restaurant and bar stocks. Larger cap stocks in the industry are seeing similar gains, too, however, they’ve suffered far less in the COVID-19 crash.
That means that in the event of a market-wide recovery, they won’t “pop” quite like the mid-caps will.
Back in late 2018, after the market sunk in response to an ill-timed rate hike from the Fed, BJ’s Restaurants Inc. (NASDAQ: BJRI) – a mid-cap restaurant and bar stock – erupted for a 150% gain over the next year.
Don’t be surprised to see BJRI and its peers produce a repeat performance after COVID-19 is defeated.
We could still be a few weeks off from a true rally, but for investors looking to snatch-up discount shares from beleaguered industries, mid-cap restaurants might be a good fit.
Stocks in this grouping almost broke out above key resistance yesterday. If the outbreak keeps losing steam this week, mid-cap restaurants could easily burst higher, leaving that level of resistance in their rearview mirror.
And when the post-coronavirus recovery eventually arrives? Watch out, because stir crazy Americans will undoubtedly dine out en masse, racking up their tabs – and maybe even record quarterly profits within the industry – in the process.
