Caution: The Next Market Crash Could Happen Very, Very Quickly!

With the possibility of another market crash on the way, it might be useful to look at the likes of Shopify to protect your capital.

Canadians witnessed one of the steepest drops in the market this year after a decade of fantastic results. Courtesy of the COVID-19 pandemic and its effects on the economy, the S&P/TSX Composite Index nosedived by 37.43% from its February 2020 peak to bottom out on March 23, 2020.

The market rebounded soon after, since investor panic began to subside, and the sell-off frenzy ended. At writing, the index is back up by more than 37.53%, but its recent rally began showing signs of the recovery slowing down on Tuesday, June 9. The S&P/TSX Composite Index is down by almost 10% from the start of the year. Is this a worrying sign?

The possibility of another crash

The stock market is primarily relying on investor optimism to continue its recovery. As the economy slowly opens up across the country, there is a more positive air about everything. The country added 289,000 new jobs — a far cry from the loss of 500,000 additional jobs that analysts predicted during this time.

Despite the increase in jobs and the economy gradually reopening, there is a nagging issue that should keep investors on their toes. Right now, the market is only looking in decent shape, because investors have become calmer. If cases begin to ramp up in a much-feared second wave of infections, we might see the market plummet again.

If it happens, the decline will be swift. People are already on edge due to the devastation they have seen in the past several months since the onset of the pandemic. Any adverse development in COVID-19 will set off a very short fuse.

Defending your capital

I have considered several stock markets and how they performed during the COVID-19 bear market that managed to cause the S&P/TSX Composite to dip so low. Among them, Shopify (TSX: SHOP)(NYSE:SHOP) caught my attention.

The darling tech stock has been a beacon of hope and strength for investors. During these challenging times, the star performer continued to excel and baffle investors in the stock market. While the entire market dipped by almost 40% between the start of the year and its March 23rd bottom, Shopify gained 2.31%.

Even though the gain is insignificant, the fact that the stock completely went against the broader market shows how resilient it is. At writing, the stock has rallied to a further 130.68% growth from its price on March 23, 2020. This premier growth stock does not seem to let anything affect its growth or shake investor trust.

Foolish takeaway

The market is worried about a second wave that can devastate stocks across the board. The economic toll of another spread will be huge. Shopify continues to soar, as it announces several new developments and ideas that are helping businesses excel during this time.

The crisis has accelerated the trend towards e-commerce, and Shopify is in the perfect position to help businesses around the world make the migration. I think that if you have substantial capital set aside, Shopify could be the worthwhile investment to watch your capital grow in case of another market crash.

Fool contributor Adam Othman owns shares of Shopify. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Shopify and Shopify.

More on Tech Stocks

telehealth stocks
Tech Stocks

1 Canadian Stock Down 42% to Buy and Hold Forever

This health tech stock is trading at a discount as it continues to grow and expand a business very much…

Read more »

space ship model takes off
Tech Stocks

Ottawa’s Defence Spending Boom: This Canadian Tech Stock is Already Cashing In

MDA has identifiable government and defence work, but its backlog and profit margins reveal more than the spending headlines.

Read more »

Printing canadian dollar bills on a print machine
Tech Stocks

I’d Keep Shopify for its 18% Free Cash Flow Margin

With an expanding 18% free cash flow margin and massive share buybacks, Shopify proves why it remains a top TSX…

Read more »

quantum computing is still in infancy
Tech Stocks

A Quantum Computing Stock Canadian Investors Can Buy Now

Looking for a quantum computing stock? D-Wave offers exposure to an emerging industry, with paying customers and plenty still to…

Read more »

ETF is short for exchange traded fund, a popular investment choice for Canadians
Tech Stocks

A Handful of Tech Giants Is Carrying Wall Street: Canadians Holding U.S. Index ETFs Should Know How Concentrated They Really Are

XQQ's top 10 holdings make up 46% of the fund. See how concentrated Canada's Nasdaq 100 ETF is and why…

Read more »

man makes the timeout gesture with his hands
Dividend Stocks

Why Dividend Cuts Happen and How to Spot the Warning Signs

Learn why dividend cuts happen and how to spot warning signs, using BCE and TELUS to examine cash flow, debt,…

Read more »

The letters AI glowing on a circuit board processor.
Tech Stocks

Nvidia Just Hit $5.8 Trillion: The Canadian Stock Riding the Same AI Wave

Celestica’s AI exposure is supported by operating results, while cash investment and valuation make the buying decision more demanding.

Read more »

man in bowtie poses with abacus
Tech Stocks

A Simple Way to Estimate Your Retirement Number

Here's how Canadian couples can calculate their retirement number in 2026.

Read more »