Health care and consumers staples are sectors that typically perform well, even in moments of market stress. But during the coronavirus crisis, these sectors have provided slightly less downside protection, says Ramiz Chelat, global equities portfolio manager at Vontobel Asset Management.

On the consumer staples front, the coronavirus shutdown is impacting consumption outside of the home in places like restaurants and bars. For example, companies in the beverages and alcoholic beverages space have seen a material decline in demand. “Particularly in the initial stages of drawdown, these companies sold off like the rest of the market. Now they have somewhat recovered, which is encouraging, but I think . . . they will see material volume impact this year.”

That said, Chelat expects downside protection to come down the road because, in a U-shaped recovery, as the economy re-opens, these businesses should be resilient as they’ve been in the past. “We would expect that defensiveness to come through.”

Similarly, on the medical technology front, he anticipates the downside protection will come through in the medium term. While the pandemic put many unrelated hospital procedures on hold, patients can’t wait forever. “What we’re confident of is that, as the hospital utilization comes back to normality, in the second half and into 2021, those procedures will come back. We believe a lot of these procedures cannot be deferred indefinitely, especially things like pacemakers or cardiovascular-type operations that need to treat recurrence in strokes or heart attacks.”

Speaking about quality stocks more generally, Chelat notes that in past downturns, these have outperformed, driven by consumer staples and health care. The difference between quality portfolios today and past downturns is they include software companies, which are proving to be very resilient.

Overall, coming out of the crisis, high-quality businesses will be in a better position than they were over the past 12 months, he says. “That is because a lot of competition with weaker balance sheets or with less competitive positions will lose market share and potentially fall away.”