Shares of Brunswick (NYSE:BC) soared 11% on Thursday despite no company-specific news. The markets are focused on the prospect that at least parts of the nation will be reopening in the weeks to come, which is raising hopes of a quick recovery, with consumers soon reopening their wallets to make discretionary purchases.
Brunswick, a recreational boat manufacturer, has seen its shares crater due to the COVID-19 pandemic. Consumers aren't thinking about buying boats during a stay-at-home order, and they could find it hard to make such a big-ticket purchase once the pandemic is contained should the economy fall into a recession.
Shares of Brunswick lost 60% of their value between mid-February and early April. But the stock has recovered nearly half of that loss in recent weeks as optimism grows that the pandemic could soon be behind us. The White House is making initial plans to reopen parts of the economy, and some states, including Georgia, are getting out ahead of Washington in beginning to allow businesses to resume normal operations.
Some in the recreational boating industry are hoping their business will get a long-term boost from the pandemic, which could change consumers' behavior and make them look to personal watercraft for leisure instead of getting on airplanes or staying in hotels.
Investors need to be careful not to get ahead of themselves. The initial reopenings are (at least for now) limited and controversial. We still don't have the pandemic contained and have no idea what shape the economy will be in once it is. Job losses are skyrocketing, and it seems premature to assume that consumers are going to rush out and make big-ticket purchases as soon as the "all clear" is sounded.
Brunswick is an industry leader and should be able to navigate whatever rough waters are out ahead, and it is possible the market overreacted when sending the shares down 60% in a little over a month. But rallies based on hope are easily deflated, and it will likely take only a couple of negative headlines about the pandemic or the economy to see the shares reverse course once again.