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How will Covid-19/Coronavirus Affect my Alternative Investment Portfolio? (Part 2:The Economy)

Updated: Sep 6, 2023

Despite high uncertainty, we now know enough to make some intelligent guesses on what might happen. Here are 4 possible scenarios and what they might mean for different sectors of the economy.

How will Covid-19/Coronavirus Affect my Alternative Investment Portfolio? (Part 2:The Economy)

(Usual disclaimer: I'm just an investor expressing my personal opinion and not a registered financial advisor, attorney or accountant. Consult your own financial professionals before making any financial decisions. (Code of Ethics: I/we do not accept any money from any sponsor or platform for anything, including postings, reviews, referring investors, affiliate leads or advertising. Nor do we negotiate special terms for ourselves in the club above what we negotiate for the benefit of members.).


In part 1 of the series, we talked about the coronavirus that causes Covid-19 and what we know and don't know about it. In this, part 2, we'll talk about 4 possible scenarios and what they might mean for different sectors of the economy. Then, later in the part 3, I'll talk about what this could mean for different alternative investment asset classes and my personal strategy.

By the way, this is one article in a multi-part series that has been published weekly since the pandemic began back in March 2020. The series started with three introductory articles on the virus, effect on the economy and alternative investment classes. And then it moved on to weekly updates on the latest and greatest developments (along with weekly updates on my evolving personal portfolio strategy). You can see the links to every article in the series here.

The Known Unknowns

As mentioned in part 1, there's a lot of uncertainty around several key factors about the virus. The main ones are:

  1. How long will control measures be in place?

  2. How many people will it spread to?

  3. Will we experience hospital overload?

  4. Will clinical trials of repurposed drugs to treat Covid work?

  5. Will warmer temperatures slow down the spread?

And there could be others that don't look important now or are less clear, but become more visible as we learn more and the situation evolves.

These factors are going to determine what kind of economic activity will be depressed and how long. And that in turn will drive how different asset classes will do.

I've seen a lot of so-called forecasts take a stab at this and somehow arrive at a single predicted scenario (and often a single "magic number" for GDP or something similar). For me, that's an immediate red flag. With this much uncertainty, any reasonably done (and reasonably useful) forecast needs to include several possible scenarios. The uncertainty needs to be reflected, with a range of possible outcomes. So that's what I've done here.

The Fed Alone Can't Bail Us Out This Time

Today, the Federal Reserve announced that it cut rates close to zero and has started another round of quantitative easing. The latter is controversial, but in the past has led to stock market and asset price increases.

At the same time, the Federal Reserve chairman, Jerome Powell, acknowledged the limits of the Federal Reserve to address the root causes of the current crisis. "We do recognize that a rate cut won’t reduce the rate of infection... It won’t fix a broken supply chain. We get that. We don’t think we have all the answers."

Measures that encourage people to spend more money more comfortably are great, but they work best if people have money to spend, and if businesses are open and available for it to be spent.

So while helpful, the Fed will only be a side-player in the story of how the country addresses the challenges of the virus.

A Tale of 4 Viruses

In my opinion, there are at least 20 or 30 different possible ways things could play out. But they also can be categorized (at least at this early stage) into 4 major scenarios, based on the most important factor: how long will economic activity be depressed?

Right now, the main driver of that will be how long control measures are in place. And that in turn is driven by how long it takes the virus to run its course.

There are scenarios where the above wouldn't be true. For example, the longer economic activity is depressed, the greater the chance of exacerbation from secondary and knockoff effects. If that happens then there could even be longer-term/chronic issues that end up driving how long recovery takes. But right now we don't know what will actually happen. So I'm keeping the analysis to the situation as we know it right now. If that changes then I will adjust at that time.

Here's what I currently see as the possible scenarios:

1) "Saved by the bell": Very short: 0 to 1 month

This is the scenario everyone hopes to see. Unfortunately it's looking less and less likely.

The ideal scenario here would be containment of the virus, so it doesn't spread widely at all. But as mentioned in the previous article, the U.S. appears to have squandered this one-time opportunity through inadequate preparedness and levels of testing. There are myriad indications that the official statistics are greatly under-counting the actual spread of the disease.

This scenario could also happen if some X factor that isn't currently apparent causes the virus to be significantly less spreadable than in Wuhan, Italy and others places. If that happened, then the spread would be much narrower than expected and control measures would be very brief.

2) "Shorter:" 1 to 2 Months

This scenario has an outcome that would still be pretty decent. This would happen if one of the good X factors discussed in the last article kicks in. For example:

  1. One (or more) of the repurposed drugs on trial is found to work dramatically (and quicker rather than later).

  2. Or the virus is dramatically slowed down by the increase in heat and humidity of spring.

  3. Or both of the above happen (even if individually they might be less dramatic, together they have a large effect).

This slows down the spread of the epidemic and allows it to be brought under control relatively quickly.

3) "Longer": 2 to 6 months

There's two ways to get to this outcome: one would be good and the other pretty awful.

  1. In one of the good scenarios: one of the good X factors (mentioned above) kicks in. It's not the dramatic difference described in the previous scenario, but it's enough to slow things down over the longer term. And/or maybe people get really serious about social distancing. As discussed in the previous article, we might do better than Wuhan in some areas and worse than others. But overall we get it relatively right. And we don't experience any hospital overload because our need for the ICU is significantly better than Wuhan's 5%. Due to one or more of these factors, the spread is slowed down dramatically and the virus is brought relatively quickly under control.

  2. The bad way this could also happen is if hospital overload happens. In this scenario, we probably didn't get much help from the good X factors. Probably too many people didn't get very serious about social distancing until it was too late. And maybe there are more bureaucratic and governmental mistakes made. In this scenario, the virus spreads widely. If that happens, we almost certainly do not have enough beds in the hospitals to handle all of the sick. The result is a very high to horrific price paid in human suffering and loss of life.

Either way, I think there would be pressure for government assistance to help people who were affected by job losses etc. If legislation ended up being passed, this might help mitigate some of the negative short-term economic effects (and potentially have longer-term effects). More about this under "X-factors" below.

4) "Very long": 6 to 12 months.

There's a couple of ways this scenario could come to pass.

  1. I believe an out-of-control, raging epidemic would be unlikely to take this long. Eventually the disease would run out of new people to infect. So it would burn out more quickly and become the previous scenario.

  2. But, a different scenario could be that we get control of the virus (it hits peak infection, and then subsides) so we ease back on the control measures. But something goes wrong. Maybe we lift them too quickly. Or maybe the virus becomes more resilient than we expected due to mutation. In this case, infection spikes up again and we have to start the whole process all over again.

  3. Another scenario is that government imposed curfews and restrictions on movement (along with social distancing) are successful in dramatically flattening the curve of infections. If this happened there probably would be no or minimal hospital overload, and a minimal price paid in human suffering and loss of life. In this scenario, there would also be a very decent chance of the vaccine coming online in very late 2020 or early 2021 (which would be within the 1 to 1 1/2 year window of November 2019). Whenever that happens, it will greatly reduce the spread. Ironically though, the length of the control measures in this happier healthcare outcome would almost certainly come at an extremely high economic cost for many companies and individuals.

If this scenario happened, I think there would be tremendous pressure for government assistance to help people affected by job loss and other issues. More about this under "X-factors" below.

Extra scenario: "Covid-19 forever" (length: indefinite)

A final wrinkle on all the above scenarios: we may never actually be able to wipe out the virus. If it's resilient enough, it might become a recurring guest each year like the flu. In this case, we would probably find ways to learn to live with it, including much better epidemic preparedness, quicker development of vaccines for new strains, etc. Additionally, infected people might have partial or even full immunity.

So, there's a high likelihood Covid could just become a "new normal". In that situation, the main damage would be in 2020. And since that's already covered in the other scenarios, I'm not looking at this as a scenario on its own.

What industries are likely to be affected?

Now that we have some probable scenarios, we can take a look at the different industries that are likely to be affected. This will drive the amount of economic damage, unemployment, lost jobs, etc., whichwill affect alternative investments.

The virus is likely to cause damage in 3 major areas (in increasing order of how broad the pain will be):

1) Supply chain:

Many U.S. companies rely on Chinese companies to supply parts or assemble their products. As an example, Apple manufactures the iPhone in a FoxConn manufacturing plant in Zhengzhou, China. So when it was shut down, Apple didn't have a quick or easy way to find a replacement and couldn't deliver its own orders. This has caused revenues to drop and put financial stress on some of these companies. Many (especially those listed in the public stock exchange) have record levels of debt to manage, which could cause them additional stress. If that stress is sustained over several months, this could lead to layoffs and/or bankruptcies which in turn would drive up unemployment and ripple through the economy.

Currently, China Inc. claims that it's slowly coming back online. For example, FoxConn says that it is now operating, but at 50%. It claims it will be back at 100% operation by the end of March. That would be great if it happens, and minimize the damage.

But sometimes the removal of control measures too quickly after an epidemic lets the germ get out of control again. So China will have a challenge to manage this. (And the lessons they learn will be helpful for us when we get to the same stage). So we'll have to wait to see what happens.

2) Oil price war:

The coronavirus has caused a worldwide drop in economic activity that has lowered demand for oil and the price. Saudi Arabia didn't like this and asked Russia to lower its production (along with the OPEC countries) to keep the price higher. But Russia balked because they felt that it would just help US oil industry frackers and at their expense.

So Saudi Arabia is now playing a high stakes game of chicken where they've done the opposite and flooded the market with extra oil. This caused the price to plummet about 25% to around $31-$34 a barrel.

This is below the $45/barrel price Russia needs to run without a deficit. Their hope is that this pressure will force Russia to agree to cut production which will raise the price for all.

Meanwhile, US frackers need oil to be at least at $50 a barrel to be profitable. Many of them are highly indebted and would not be able to stay running at a loss for a long time. Analysts believe Russia can run 5 to 6 years at a deficit before it causes a problem, and Russia shows no sign of blinking. So the hope is that Saudi Arabia (which is also running a deficit at the current price and can't do that forever) will blink and end the price war. If that happens then the pain might be temporary.

On the other hand, Saudi Arabia may wait at least until the U.S. frackers are badly damaged. If that happens, we would expect to see a lot of U.S. bankruptcies along with lots of unemployed oil workers (which in the past has been one of the good sources of incomes for those without a college degree).

3) Control Measures/Social Distancing:

As mentioned in the last article, these measures are needed in an epidemic to prevent hospital overload and high to horrific levels of suffering and loss of human life. But they generally come at a high economic cost.

If the virus takes a while to run its course, we can expect considerable corporate pain, layoffs and unemployment in all of the below types of companies:

a) Travel related (airlines, hotels, cruises, travel sites etc.) which is 10.4% of GDP: Currently there is a ban on tourists from Europe and China, and the CDC currently recommends that people over 65 not travel. And both the voluntary reduction of travel and the mandatory restrictions are expected to get worse over time.

Already airlines have announced that they are cutting flights, and staff. And no business can run without a profit for long. And many of these are highly indebted (such as American Airlines which could be forced into bankruptcy ). Or the airlines may be bailed out in which case the cost to the already stretched government and taxpayers may be relatively high

b) Real estate construction (and related) which is $1.15 trillion and 6.2% GDP.

These projects were already challenged by the supply delay from China. In a sustained outbreak, they won't be able to staff the workers to complete the construction, and nervous financers may be likely to pull funding.

c) Restaurants + related (local establishments to national chains, Starbucks etc. as well as their suppliers) at 4% of GDP

These would be hit hard by sustained control measures and/or social distancing. In the middle of a deadly epidemic, diners would be unlikely to want to play "virus roulette" and hope that the person that prepares their food, serves them and the other customers are virus free. And it's possible that there could be mandatory bans.

c) Residential real estate/ real-estate agents/home sales (and related): about 3 to 4% of GDP. In the middle of an epidemic, people will be unlikely to want to risk infection to shop for homes. In a sustained epidemic, all related real estate activity (including flippers) etc. would be expected to come under significant stress.

d) Tourism (theme parks to national, state and local attractions): 3.2% GDP. These would be hit hard by sustained control measures and social distancing.

e) Customer facing bricks-and-mortar retail (malls, clothing, nonessential consumer goods, luxury goods): All retail makes up 5.9% of GDP. Retail stores were already under pressure due to online competition and "retail Armageddon". In a sustained outbreak many might sustain a lethal one-two punch that may be fatal. This also includes all customer facing retail such as salons, hairdressers, etc. Luxury goods and nonessential consumer goods will probably come under similar pressures.

The notable exceptions will be grocery stores and pharmacies. People are still expected to reduce their visits but will be forced to visit for supplies. Some pharmacies like CVS say they will offer home delivery.

f) School and universities (education 1.3% of GDP + more indirect) These closings may hit those who work there hard.

But the indirect effects of this may arguably be higher than even the direct. School closings can cause significant secondary financial stress to parents who work. Those with grandparents would be putting them at risk to have them watch children (which have been shown to be symptom-less carriers and spreaders). They now have to either find daycare (which is expensive), get permission to work at home or reduced hours, or perhaps may not even be able to keep their job.

g) Spectator and group sports + related (NBA, NFL, etc. ):

In an outbreak, attendance would be dangerous for fans and players alike. The NBA, NHL, PGA and other sports have announced they will stop play during a Covid outbreak.

h) Gyms/rehab/kid and adult recreational: People are unlikely to go to these places during an outbreak and they can suffer a significant hit.

i) Non-critical Medical/elective surgery etc.: At least in the short term, people in the middle of an epidemic will not be wanting to go to the dentist to have a stranger touching their mouths, or even a podiatrist working on the feet. People will also be putting off elective surgery etc.

j) Others: Unfortunately this is probably not an exhaustive list and I think it's likely there will be others as well.

The silver lining:

The above is a pretty depressing list. There are a smaller number of businesses that should benefit from an outbreak.

  1. Online shopping (Amazon ,etc.)

  2. Home delivery services (Uber eats, etc)

  3. Online and home entertainment (NetFlix, etc)

  4. Grocery stores (Public, Walmart, etc.)

  5. Pharmacies (CVS , etc)

All should see huge spikes in business and revenue. Also, manufacturing of certain epidemic related goods such as wipes, disinfectants, etc. should see an upsurge.

X-Factor: Government economic support

If the virus takes a while to play out, there will be significant economic disruption to a wide part of the economy. If that happens then I feel the scale and the speed will cause many citizens to demand that the US government step in to provide significant support to those affected.

A bill was passed on Friday to give sick pay to those affected by the virus, and this is expected to be signed into law. If so then this is a helpful and necessary 1st step. But it would be only a Band-Aid over the larger economic damage caused by all of the issues above.

If this scenario happens then to prevent a protracted downturn the government would have to consider significant support. If that happens that could dampen a lot of the pain. The challenge will be that the country has increased its debt load over the last several years and is currently running record deficits ($1.1 trillion) and debt ($23.3 trillion). While we likely would be able to afford this in the short term (and would need to), the medium to long-term negative effects could be longer-lasting.


So the above was a summary of what this could mean to the economy. Next, in part 3, we'll talk about what this could mean to different alternative investments and my personal investment strategy going forward.

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About Ian Ippolito
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Ian Ippolito is an investor and serial entrepreneur. He has been interviewed by the Wall Street Journal, Business Week, Forbes, TIME, Fast Company, TechCrunch, CBS News, FOX News, USA Today, Bloomberg News,, CoStar News, Curbed and more.


Ian was impressed by the potential of real estate crowdfunding, but frustrated by the lack of quality site reviews and investment analysis. He created The Real Estate Crowdfunding Review to fill that gap.

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