The world is anxiously staring at a recession, the economic output in the next quarter is going to shrink, and the growth rate is expected to sharply decline, and this will all be reflected in stock price and corporate earnings. Since most of the businesses have ceased their operations, there are expectations that their revenues and profits might be impacted. As a result, the impact can also be felt on the balance sheet of that particular company.
However, can this be considered as an opportunity? What should be my action plan? Can this be considered a good time to buy? It can be said that COVID-19 pandemic that the world is currently facing is different.
We saw the Spanish flu epidemic in 1918, but for most of us reading this today, we do not tend to hold on to anything that might have happened over two generations ago.
If you listen to the experts, there is no need to fear in such situations as markets regularly go through cycles like these. Since markets are witnessing unfavorable momentum, some of the market players are of the view that there is an opportunity for the investors as most of the businesses with strong fundamentals are trading at decent levels. However, some basic research is required by the investors. A halt in the economic activities could significantly impact the economy. If global growth comes into question, the sentiments of investors might be impacted. Therefore, the stock markets might witness negative momentum. The equity markets in New Zealand are generally impacted by the momentum of the global stock markets as well as by the performance of broader economy. The stimulus packages announced might help the economy to revive moving forward.
A number of social distancing measures have been announced across the world in order combat the spread of COVID-19.
Let us look at the tips you should do in these tough times.
First: The most important thing that matters right now is cash. It is very difficult to take out your invested capital from a falling stock market. Take out the cash if you do not have any, even though it is at a loss. However, if you have enough cash in the bank, stay put. This is not the appropriate time for any investment choice. Investing in the market when the upcoming future is uncertain is like entering into a dark cave with no torch in hand—it is simply foolish. We are in a war zone situation, so existence is the main concern. Make sure that you have enough cash to handle yourself and your family.
Second: Understand that this is an undiscovered territory. In the time of social media and the internet, there is a lot of data hanging around. There are anecdotes to lift the mood; and there are some worthless forwards. Train your ears and eyes on what has helped for other countries. Clearly understand what your local authorities, government are trying to say. Social distancing has worked out well for China and South Korea. It is very important to rely on authentic sources and news related to COVID-19.
Third: Stop the denial. The problem which we are facing is real, and the world has not found a solution yet. There is no need to panic. But it is very important to acknowledge that this is big, new, and totally unknown. An epidemic of this scale will call for behavior and action we have not seen before.
Government of NZ Supports Small Businesses through COVID-19
The Government of NZ has made an announcement about the package of new measures which could offer some relief for small and medium-sized businesses.
Grant Robertson, the Finance Minister, says while the Government of New Zealand has acted quickly in response to the global pandemic, with around $20 billion in support previously announced, it considers that more amount is required.
The new measures include:
- $60 million estimated annual savings to business each year from changes to the tax loss continuity rules;
- Greater flexibility for affected businesses affected to meet their tax obligations;
- $3.1 billion tax loss carry-back scheme;
- $25 million in the next 12 months for further business consultancy support;
- Measures to support commercial tenants and landlords.
The government has taken decisive action during this pandemic so that the blow for workers and businesses can be reduced. The government wants the businesses to remain solvent to aid the economic recovery as it moves on from the current situation.
The release stated that some of the businesses are struggling to meet up their non-wage fixed costs, such as rent, interest, as well as insurance, but are not currently in the position to assume extra burden of debt.
The Government is also planning to increase the period for lenders from 10 to 20 working days for mortgaged goods and from 20 to 40 working days for mortgaged land. This would apply to home loans as well as commercial mortgages.
The financial stability of the economy has become an overbearing worry throughout the country. The current condition of the economic and job scenario seems baffling as businesses are either shut or are at minimal operation. However, the government of New Zealand appears to be fiscally stable to fight the economic impact of the COVID-19 in the country.
As the extent of the outbreak continues to be a concern, a joint effort and positive nudge is what a nation might need to come out of the crisis.