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Market Crash 2020 Sequel: Why the Next Wave Could Be Worse

When you talk about movies, the original is often better than the sequel. But in the investment world, no one wants a sequel to the 2020 market crash. The second wave could be worse than the first.

Panic hit the financial markets when COVID-19 struck. Plunging oil prices contributed to heightened volatility. TSX stocks were falling like dominoes, with some of the top names suffering their worst beatings.  On March 12, 2020, Canada’s main stock market index posted its most significant single-day decline (12.34%) since 1940.

Financial stimulus packages and COVID-19 emergency response measures are already costing billions of dollars. Imagine the devastating impact on the economy if a repeat should happen.

Calmer market

Markets are more relaxed now since that unforgettable day in March. The TSX was able to pare down the losses. From 12,508.50, the index is at 15,974.91 as of June 8, 2020, or a climb of 27.71%. Year to date, it is still down by 6.37%.

Energy, financial, and healthcare stocks are boosting the market recently. Oil prices are rebounding because of the historic production curbs by OPEC+ and Russia.

Emerging investment options

Trillium Therapeutics (TSX:TRIL)(NASDAQ:TRIL) is outperforming the general market by a mile. This $873.58 million clinical-stage immuno-oncology company develops innovative therapies for the treatment of cancer. The year-to-date gain of the biotech stock is 687.2%. As of June 8, 2020, it was trading at $10.47 per share from $1.33 on December 31, 2019.

According to Trillium President and CEO Jan Skvarka, the company is off to a good start in 2020 despite the $70.1 million net loss in the quarter ended March 31, 2020. The company is making progress in its dose-escalation studies of novel CD47 checkpoint inhibitors TTI-621 and TTI-622.

Trillium was able to raise $117 million in funding from leading healthcare investors. As of March 31, 2020, it had $135 million in cash, cash equivalents and marketable securities. The fund provides Trillium sufficient cash runway through 2022. Also, the company is not experiencing any disruption in its drug supply chain.

Ballard Power Systems (TSX:BLDP)(NASDAQ:BLDP) is also a top performer. The year-to-date gain of this industrial stock is 80.38%. Although the bottom line in Q1 2020 was a net loss of $13.5 million, there was a 50% increase on the top line compared with Q1 2019. Total revenue hit a record $24 million.

Similarly, the gross margin went up to 22% in Q1 2020. The 31% year-over-year increase in cash operating costs was due to higher investment in technology and product development. The revenues from Ballard’s Power Products and Technology Solutions increased by 95% and 20%, respectively, during the quarter.

Expect Ballard to gain more strength moving forward.  This $4 billion company manufactures and sells proton exchange membrane (PEM) fuel cell products. The company’s vision is to deliver fuel cell power for a sustainable planet. Mobility vehicles such as buses, trains, trucks, and marine vessels use Ballard’s zero-emission PEM fuel cells

Good vibes

Good vibes are pervading as the TSX builds on the momentum. Another market crash will only dampen investors’ confidence or appetite and wipe out all gains.

Speaking of the impact of a market crash sequel...

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

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