In One Chart: ‘The best bet might be to stay on the sidelines,’ according to this chart of winners and losers in this pandemic

In One Chart

Amazon is a winner, market-wise, in this pandemic.


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If the stock market is, indeed, a forward-looking instrument, one look at this chart suggests there’s still plenty of gloom out there in terms of where this pandemic is headed.

As you can see, the Quarantine Index, introduced by Cornell Capital Group, has been on fire ever since the coronavirus took hold in the United States. Makes sense, considering the group consists of companies poised to profit from lockdown orders — think Amazon
AMZN,
+0.68%

, Netflix
NFLX,
-0.35%
,
GrubHub
GRUB,
+4.91%

and Zoom
ZM,
-5.80%

.

Then there’s the Anti-Quarantine Index, which is comprised of those companies hardest hit by the pandemic — hotels, airlines, cruise ships, movie theaters, etc.

“Not surprisingly, the Anti-Quarantine Index is almost a mirror image of the Quarantine Index,” Cornell Capital explained. “It falls while the Quarantine Indexes rises as the crisis unfolds.”

In an efficient market, the boutique investment group said, the two lines should reflect information about the expectation of what’s next for the crisis.

“If news were to arrive suggesting that reopening were to occur sooner than previously thought, then all three indexes would be likely to rise, but the anti-quarantine index should rise more than the S&P 500 and the quarantine index should rise less,” Cornell Capital said. “The reverse would occur if the news implied an unexpected extension of the lockdown.”

The fact that the Quarantine Index continues to push higher, while there are scant signs of hope from the Anti-Quarantine stocks, signals that investors are preparing for the coronavirus — and the impact it’s having on the U.S. economy — to stick around for the foreseeable future.

What’s an investor to do? “Given such uncertainty,” Cornell Capital told clients, “the best bet might be to stay on the sidelines for the time being and see how the two CCG Indexes behave in the next few weeks as steps are taken to reopen the economy.”

There wasn’t much uncertainty in the stock market on Monday, with the Dow Jones Industrial Average
DJIA,
+3.85%

up almost 1,000 points.

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