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This would be probably the first time in history that global markets have been plagued by a virus! Be it Sylvia Browne’s prediction in her book doing rounds currently, that was written over a decade ago, or conspiracy theorists claiming to have anticipated a virus outbreak ages ago, the world is battling a “pandemic”, as the World Health Organisation (WHO) has proclaimed the recent coronavirus (COVID 19) to be.
The traumatic outbreak, with its epicenter in Wuhan City of China, has over 218k confirmed cases across the world and more than 8k deaths. Even though recoveries are being made (~81k as on 19 March 2020 according to a John Hopkins database), the rate at which confirmed cases are increasing is worrisome.
This has posed a challenge to the medical experts who have been unable to come up with a single robust cure for the deadly virus, and are thriving to do so, while recoveries continue through quarantine measures and available easing medication.
COVID 19 Impact- A Holistic Disaster?
We are deeming COVID 19 as a holistic disaster. Yes, it sounds formidable and grim- because it is! Let us tell you why-
- On the global health spectrum, the virus has made people sick to an extent that some have died, and others are fearing its consequences. Imagine the anxiety when you know that an ongoing plague has no solid cure, yet!
- On the economic spectrum, global economies have been noticeably downgrading their forecasts for the year, primarily due to the adverse impact on businesses.
- On the business spectrum, manufacturing has had the hardest hit. The virus has propelled nations to announce war time measures- locked down cities, closed production units, ban on gatherings and so on, to avoid further spreading of the contagious virus. This does not allow people to transact in any way and businesses are suffering.
- On the share market spectrum, global sell offs have been stealing headlines since over two weeks now. Investors are noticeably nervous and every day at present time, market participants are waking up to news that business sentiment is not improving for them to confidently invest their money.
Check These Facts!
On 2 March 2020, The Organisation for Economic Co-operation and Development (OECD), released its Interim Economic Assessment which revolved around the coronavirus, which, according to the intergovernmental economic organisation, has the world economy at risk. Let us graze through some facts highlighted in the report, for a statistically clear idea of the pandemic’s impact on economies-
- Annual global GDP growth is projected to drop to 2.4% in 2020, and might pick up around 3¼ per cent in 2021 in the event of the virus recovery
- Even if the COVID-19 effects fade gradually through 2020 global growth could be lowered by up to ½ percentage point this year
- In a scenario where this is a contained outbreak, global equity prices and non-food commodity prices are lowered by 10% in the first half of 2020
- China’s growth might slip under 5% in 2020, before recovering to over 6% in 2021
- Growth in the euro area is projected to remain sub-par, at around 1% per annum on an average in 2020-21
(Source: OECD)
Should You Stock Up or Down on Equities?
Now that we understand the repercussions of the pandemic surrounding us, it naturally translates that investor sentiment has been hit hard and nervousness has been prevailing across global markets- the sell offs are a factual proof of the same.
Good Read- Coronavirus Takes a Toll on Global Markets
A genuine query for investors amid the market mayhem is- should they stock up (add stocks to their portfolios, invest and buy) or down (sell, hold or just remain inactive in the market). Well, this is ideally a personal call and depends on a variety of factors- the risk appetite, ongoing micro and macro-economic events, expert suggestions and instincts and so on.
But, a little insight on the market can always help in decision-making, and we have that for you- READ ON!
(Please note that the below should be regarded as information and not recommendation)
Honestly, we are witnessing unpredictable times in the market. Fundamentals, such as earnings, have been tarnished, companies are taking the one-day-at-a-time approach, and a few are lowering guidance.
But there too, silver linings that should not be left unseen in the share market world would be- firstly, the market is dynamic, and change is the only constant and secondly- long-term investing is an old yet robust belief that investors have been following.
At times when manufacturing and E&P companies might have slumped due to the COVID 19 crisis, others, for example the virtual players have every opportunity to shine- with online purchases and work from home trends on a rise. These and the financially strong companies are on the watch list of many investors.
Another sector that has been gaining special traction are the safe haven companies. Investors have been flocking to assets like gold, which was at a 7-year high recently and even bonds have been surging. However, there is no answer to if this trend will last.
One can exercise his vigilance and knowledge of the market, especially in these volatile times to make decisions but not be completely dejected or nervous about the stock behavior. We say this because the Oracle of Omaha, Mr Warren Buffett opines that long term investing should continue to remain the key and one should tap lucrative stocks even when the market is seeming to hit rock bottom, because it will get better- It always does!
READ HERE FOR SOME OPTIMISM AMID CRISIS- Stocks Sell-Off Amid Coronavirus? Warren Buffet’s Take on the Chinese Pandemic
