These days, the two words that are resonating throughout the world are “Coronavirus” and “Stock Market” and interestingly, both of these have an inverse relation. The novel COVID’19 is spreading at the speed of light and has lethally affected the worldwide markets after years of Bull Run.
The previous week happened to be the deadliest for the stock market as the major companies and indices like Dow Jones, S&P 500, and NASDAQ have experienced one of the massive blows of all time since the after Black Monday crash of 1987, when the index experienced its worst slide. The industries worldwide have been facing a dearth of profit and working capital or cash in hand as the businesses lose their take after China turned out to be the epicenter of the virus.
The virus turned out to be a loose thread which invited the global recession as it spreads dramatically around the globe, leaving no stone unturned. With this, JP Morgan economists are expecting the Gross Domestic Product to shrink by 2% in the first quarter followed by 3% in the second quarter. However, no part of the world has served as an exception as Europe takes over the stage after China and Italy.
Having noticed the impact of COVID’19 (now known as a pandemic), which has sunk the US and European economies. Not only these, but the major sectors worldwide have been a prey to this outbreak.
Now, when we say that the world economy has been trapped and crumbled, what have been the national measures that are taken to lighten this disruptive shock. Inevitable to point that US President Donald Trump has called Coronavirus a “National Emergency.”
— GOP (@GOP) March 12, 2020
President Donald Trump has realized the need of the hour and has taken several measures against the Pandemic as he rightly believes that the health of Americans is of foremost concern and priority. Keeping this in mind, he has suspended all the travel visas for next 30 days, which were previously only suspended for China and South Korea, which now includes Europe and other nations. A strict screening of the passengers returning from any country has been at the top of the checklist. The recent travelers have been asked to quarantine themselves as they keep a check on their health issues for next 14 days after returning.
Well, after being called a “National Emergency” by the President, he has been getting a mix of reactions apart from the recovery that the market made before the closing hours on Friday.
My Q: You said you don’t take responsibility for slow response to coronavirus but your administration disbanded the White House office on pandemics?
President Trump: “That’s a nasty question…When you say me, I didn't do it. We have a group of people [in the administration].”
— Yamiche Alcindor (@Yamiche) March 13, 2020
Positive Signs Roll-out
However, the positive outcome is all that matters because it has literally splashed over as the economy is what matters, at this point in time. Taking into consideration the positive impacts after Trump called Coronavirus as “National Emergency,” Dow Jones rose from its worst day in 30 years with a spike of nearly 2000 points after the announcement. This rightly gained back the trust of investors that the President’s administration is going to fight the outbreak before the economy crashes and human race dies. Not only this, but yesterday’s closing ramped up the indices as each of them closed with over 9% gains, which tried to make good the losses.
Despite the rally on the previous day, the market has not readily posted gains as the marks of bearish downturn are likely to have a long-lasting effect. Investors have shed billions of rupees, while, looking at the graph of their fate.
A Look at the Disturbing Stats
This slide into a bear market is known to be the fastest since World War II. And, the market has posted 2nd biggest weekly loss in the last 10 years, which led the investors to lose all the profit they made in 2019.
The S&P 500 index jumped 9.3% on Friday (fell almost 20% after the ATH of 2019), finishing the week with a loss of 14.5%, Dow Jones soared 1,985 points, or 9.4%, NASDAQ composite climbed 9.3%, and yield on the 10-year Treasury climbed to 0.96%.
The stats have been quite devastating as we see the bearish outbreak and the economy trembling at the verge of massive recession.
Is the Administration Living Up to the Expectations?
Investors were strictly demanding for a strong action from the US government to fight the outbreak’s effect on businesses and workers. Business closures have been the President’s take on the deadly virus and the concern regarding American’s health leading to announcing an agreement on a package to provide sick pay, free testing, and other resources helped boost the market.
Undoubtedly, there is a glimpse of recession, but it is believed to be mild as Detrick says, “It could be a shallow, quick, violent, scary recession, but one that bounces back quickly.” He also added, “the selling has been so swift and sharp that there remains the potential for a significant bounce after the virus and its effects start to recede.”
Adding to the safety measures taken, Warren Buffett, on Friday announced that the annual shareholder meeting for Berkshire Hathaway will be streamed live in early May without any attendees, apart from selected journalists. The meeting normally draws a crowd to rival professional sporting events.
Markets are rightly trying to understand the spreading virus, the reaction of the people to eat and action that they take in return to fight back. This is likely to lay an impact on technology stocks, airlines and hotels, healthcare, food industry, automobile due to China being the epicenter and the dependent sectors to face the blow but with national assistance now.