Various asset classes have seen a large increase in volatility over the past month or so. This can largely be put down to the Covid-19 pandemic. It has pushed a lot of investors to buy or sell in order to adjust for the new situation we find ourselves in.
You may be surprised to find out that the gold price has actually fallen around 2% over the past month. Yet over a 12-month period, it is up 26%. Its drop can be put down to clients needing to sell off gold in order to finance losses on other assets, including stocks. It looks like gold is going to struggle to move significantly higher in the short term, with it already at multi-year highs.
Bitcoin volatility has remained as high as ever. As I wrote in a piece here, the Bitcoin price has increased by 30% over the past 12 months. However, the percentage move from the high to the low during this period is over 60%! This is very high, and so I continue to be very cautious about entering into an asset such as cryptocurrency.
I much prefer to stick to FTSE 100 stocks instead for my investments. To that end, the market crash has provided some good opportunities.Â
Phone home
The first firm that appeals to me is BT Group (LSE: BT-A). The telecommunications giant has had a rocky past few years. Evidence of this is seen with the share price halving then continuing to fall in the past two years. Yet the Covid-19 pandemic could be the kick needed in order to stimulate growth.
It has been well reported that we are seeing a surge in demand for internet provision due to the current lockdown. BT said the firm had seen a surge in connectivity, while the broadband services it operates were coping well.
The company also made the commitment of no staff losing jobs over at least the next three months. For me, this commitment would not have been made if the business was struggling in the wake of the outbreak. The opportunity to furlough staff is there to ease financial burdens, yet it has not been taken by BT.
This points to BT being a buy in my opinion, as a defensive stock to ride out the current market crash. I would not even be concerned if the dividend was reduced or cut completely. This provides cash to use within the business, to support longer-term growth and profitability.
The broker
Hargreaves Lansdown (LSE: HL) is another firm I am keeping an eye on. A traditional stockbroker that has also embraced technology (via online trading), HL is able to make money whichever way the market goes. This is because the firm takes a small fee on each trade, regardless of whether the client is looking to buy or sell a stock. So really, volatility in the market is good for HL, as more trades mean more fees.
The share price for the firm is still down almost 19% since the start of the stock market crash. For me this feels a slight dislocation between where it should really be trading. Even if clients do sell investments, HL offers a Cash ISA service along with the ability to hold cash on account, so can make money even if clients are sitting in cash.