The Motley Fool

3 Ways the Stock Market Could Recover From the Outbreak

Image source: Getty Images.

Global equities are under extreme pressure due to the coronavirus outbreak. The sudden shock is painful, and panic is creeping among investors. Many are asking whether a quick recovery from the pandemic is possible.

The scenarios for recovery remain cloudy because the epidemic is still unfolding. There are indications that the global economy is heading into a recession. However, the chances that stocks can recover in a big way are strong.

Vaccine for the coronavirus

Markets can pick up the pieces after a vaccine to contain COVID-19 is developed. There are more than 20 companies and public sector organizations worldwide that are working to create a vaccine against the deadly virus. The Coalition for Epidemic Preparedness Innovations is sponsoring four coronavirus vaccine projects.

There is urgency, but developing a vaccine would take about 12 to 18 months at the earliest. And the cost could reach more than $2 billion. By the time it’s made available for widespread use, the death toll could be in the millions.

Drop in coronavirus cases

Markets should stabilize if there is a significant drop in coronavirus cases, or the number of treated patients increases dramatically. However, more countries are reporting additional cases, while some are counting fatalities.

In China, an expert said that new infections coming from the epicentre of the coronavirus epidemic, Wuhan, would drop to zero by the end of March. There was mention of targeted containment measures and medical treatment but no vaccine.

Stimulus measures

To address the anxiety of investors, the Bank of Canada cut its benchmark interest rate by half a percentage point. The U.S. Federal Reserve made the same move to ease monetary policy. Canada’s central bank is showing its readiness to adjust monetary policy. The emergency rate adjustment is necessary to support economic growth and keep inflation on target.

Top investment option

Fortis (TSX:FTS)(NYSE:FTS) is back in the limelight with a coronavirus recession looming. Investors are leaning toward a top performer in a downturn, as well as in a low-interest scenario.

The epidemic seems to have minimal effect on this utility stock. Instead of tanking, the Fortis share is closing in on its 52-week high of $59.28. The stock is up 9.43% so far this year. Over the last two decades, the total return is an incredible 1,582.63%. At present, the dividend yield is 3.29%.

This $27 billion regulated electric company is regarded as a low-risk investment. Fortis is a dividend all-star thanks to a dividend streak stretching 46 years and counting. Generating sustainable cash flow and paying dividends for 40 consecutive years are the hallmarks of this high-quality asset.

The core business continues to display robust growth. Based on analysts’ forecasts, the annual growth rate in the next five years is 4.6%. There’s a corresponding capital gain forecast of 9.44% in the next 12 months.

Patience is required

The actions of governments and central banks should temper market anxieties. Patience, not panic, must take precedence as we await the vaccine for the coronavirus.

In the meantime, you can invest in stocks with bond-like features, but pay higher returns than bonds. Fortis is the name that stands out when the going gets tough.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.