Small-cap companies in emerging markets and the United States will lead the way for good investments as the world comes out of the coronavirus-induced downturn, according to Patrick Poling, managing director of Southern Oak Wealth Group, a Sanctuary Wealth partner firm based near Nashville, Tenn.

“You can go back 70 years, and coming out of recessions small caps were the leaders. But you need to find ones that are going to survive, not something like restaurants,” Poling said during a webinar Thursday sponsored by public relations firm JConnelly. Financial industry leaders discussed the economy and the markets during the session.

Investors are going to be searching for yield during the next few months. “That may be tough right now, but Southern Oak Wealth Group favors preferred stocks over high-yield bonds. We are high on the financial sector and technology, and we are mixing in some non-retail REITs,” he said. “We also like one- to five-year corporate bonds.”

On the fixed-income side, active management wins out over passive management, said David Albrycht, president and chief investment officer of Newfleet Asset Management, based in Hartford, Conn. “Opportunities will be coming in the bond market, which will have a recovery in the second half of the year.”

How people invest in the next few months will depend on what they think the future holds for numerous world events, added George Schultze, CEO and founder of Schultze Asset Management, based in Rye Brook, N.Y. “It depends on what they think about the negative news that is bombarding us.”

Investing attitudes also depend on whether investors feel there will be another spike of coronavirus in the fall, added Peter Mallouk, president of Creative Planning in the Kansas City, Kan., area.

Schultze said many of the bankruptcies of large-cap companies occurring now were foreshadowed before February because the companies were already overleveraged.

“Certain industries were already more stressed than others at the beginning of this. The companies already had too much debt and Covid-19 made that worse. There was $1 trillion in distressed debt on the books as of this morning,” Schultze added. “Letting companies go forward even in normal times with too much debt” is harmful to the economy.

Both equities and credit investing have large challenges ahead of them. “But right now, there are growing opportunities to short-sell equities of companies that are getting into trouble,” Schultze said. “Every portfolio also needs an inflationary hedge built into it now.”

The state of the U.S. economy should not be judged by the S&P 500 because that index “is disproportionately U.S. big tech,” Mallouk said. What kind of shape the U.S. economic recovery takes depends on what sectors an investor is looking at. The S&P 500 may have a V-shaped recovery with a sharp increase coming out. “But there are a lot of sectors to look at.”