Stock Market Situation.
When bad news went live, investors immediately started to sell their stocks. Just in few weeks or even days, supply started to increase demand and the prices of the stocks have fallen. COVID -19 situation has affected mostly shares of hotel chains, tourism companies, air carriers, oil as well as mining that significantly fell in price. The stock market has crashed, when investors realised that the coronavirus is becoming a global disaster. They have completely changed their views on the global economy and analytics do not know what to expect from the future.
Generally speaking, stock markets can fall because of the economical or political events as well viruses and natural disasters. Unfortunately, these events happen very sudden and they can not be predicted either by graphs or by conducting fundamental analysis. Additionally, the chances of predicted consequences of such events most of the times is unlikely to succeed.
Bloomberg (2020) stated that due to the decrease of shipments and closure of production, consumption of oil, for instance, in China, fell by 30% or by 3-4 million barrels (per day). This is considered as one of the strongest declines in demand since the crisis in 2008.
How is the current situation similar to the economic crisis in 2008?
Several analysts state that the current situation or in particular sales on the stock market are quite similar to the situation happening in 2008-2009 years. That time investors stayed calm until the last moment, when the stock market fell. The same situation is being recalled (as the global financial crisis in 2008), when the panic with selling stocks started at the end of February or beginning of March this year. For instance, financial strategist Vyacheslav Smolyaninov claims that the investors ignored for a long time all known and unknown risks, this is why they were unprepared in the beginning of 2020 to the market to fall so sudden. That time investors didn’t fully realize how serious the situation is and how far it would go. Nowadays investors are trading with the stocks of developing countries. Additionally, the biggest outflow (since middle of 2019) of funds from emerging markets is happening also now.
Merrill Lynch economist in “Bank of America” said that they lowered the forecast of the economic growth for next 1-2 years is being lowered by 2.5%. It is the lowest level since 2009. Also, there are no clear forecasts when the fears about the virus would be reduced and market would be back to being stable.
To SELL or To BUY?
Nonetheless, coronavirus is not in the full control now and no one will know, when it would happen. Depends on the situation Covid-19 might continue affecting stock market and the global economy. Most important is that the investors have to be careful of what stocks are they buying/selling (ex. stocks of aviation or oil companies are at greatest risk). Additionally, the industries of producing raw materials are highly price-sensitive.
If the current drop in the stock market made you worry, it also might be a good opportunity to revaluate how well as an investor you are prepared for the risks and what risk appetite you have. After this, you might want to redistribute funds, so you don’t have to worry about sudden falls in the stock market. For example, if all or most of your assets in your portfolio have fallen in price, then most probably it is not diversified enough.
I hope you have enjoyed reading this blog and I am looking forward to further discussing this topic with you below in the comments.
Smith, N. (2020). Stock Markets That Never Fall Are Up To No Good Now. Retrieved May 10, 2020, from https://www.bloomberg.com/opinion/articles/2020-04-27/coronavirus-stock-markets-propped-up-by-government-hurt-growth
Stevens, P.(2020). Why the stock market is up even with historic job losses. Retrieved May 10, 2020, from https://www.cnbc.com/2020/05/08/why-the-market-is-up-even-with-historic-job-losses.html
The New York times (2020). Stocks and Bonds Yields Sink, Capping a Week of Wild Trading. Retrieved May 11, 2020, from https://www.nytimes.com/2020/03/06/business/stock-markets-today.html
Very interesting post. During Coronavirus you can make good money on the stock if you make the right decisions.
Thank you, Vyacheslav!
Catherine’s blog is interesting in that it discusses relevant topics of the day. Yes, unfortunately, in connection with the global pandemic, the stock markets of the world have fallen. Naturally, the situation with COVID-19 affected mainly the shares of hotel chains, travel companies, air carriers, etc., which were significantly cheaper. These industries are very sensitive to negative phenomena on a global scale. Investors need to consider the risks associated with situations in politics, healthcare, etc.
Elena, thank you for sharing insights with us! I am happy that you liked the blog.
Investments in the long run will not have a side effect, although there will certainly be losses. And in the short term, you must always be attentive to global crises.
For the long-term investments I think the market would adjust after some time. But investors need to be careful with the short-term investment nowadays.
Thanks Ekaterina for this very interesting article!
How do you think Saudi Arabia will compare to the US in term of loss or benefit of the current/post COVID era?
Unfortunately, nobody can tell what will happen. We have to wait and see.
Covid is really moving markets at the moment , curious to see what will happen after its over
I am also being very curious, there are many sources that are speculating, but, unfortunately, no one knows it for sure.
Yeah, my acquaintances are still buying and making profits now with this uncertainty on the stock market)
That is great to know that they are doing good on the stock market!
It’s a very special time now. Those who could analyze the tendencies will be in a great profit 😎