Just as we thought we were entering the post-corona era, the headlines started to talk about a second wave of the pandemic. Several countries have reported signs indicating that the coronavirus is making a resurgence. This is clearly a great concern for many reasons. Citizens of countries that had just opened up to allow people to get back to work are financially, or mentally, not ready for a second lockdown. The financial markets are reflecting these concerns and investors are torn right now about the direction of the stock market, and understandably so.
There have been some pretty gloomy economic predictions for many of the developed nations of the world, and this certainly isn’t helping stock markets to make any kind of rally. As unpredictable as the stock market can be, especially in these times, we thought we’d look into the facts and see which way things could go.
Fact #1 – Growing tensions with the USA and China
Donald Trump is a fairly outspoken character, and he’s said some rather harsh things towards China during the coronavirus pandemic. He has publicly denounced China’s handling of the virus and has even claimed that due to failing to inform the rest of the world about the true threat, it has cost thousands of lives. Whether this is true or not, things are not looking great between the two nations.
Of course, these are two of the main superpowers of the world, so it wouldn’t particularly be good for anybody if they had a falling out. The stock markets are already reflecting this turbulent relationship too, with a sharp decline in recent weeks. This put a rather abrupt end to investors who were claiming that the pandemic was over, and the stock market was set to reach new highs yet again.
Interestingly, the stock market has risen in recent days, especially the DOW, yet the overwhelming evidence is that this can only be short-lived.
Fact#2 – Bleak economic reports around the world
As you probably know, every government has an army of mathematicians and analysts behind them who look at the macro trends and how they can impact global economies. With that in mind, things have been rather bleak concerning estimates for multiple nations around the world. Take the UK as an example, they experienced an economic contraction of more than 20% last month, which is highly worrying. Industries like online gambling, travel, and others are still looking highly turbulent, and this isn’t helping matters.
Beyond the UK, countries like Italy and France are reporting huge drops in GDP, which is to be expected considering such financial losses. Even in the USA, official reports indicate that the country entered a recession in February 2020, right before the pandemic really took hold.
In Australia, where the gaming industry is a major contributor to the nation’s economy, the pandemic hit particularly hard. In an article by Charlotte Wilson at australia-casino.org covering the consequences of the pandemic on the land-based casinos, she concludes that the effects can be felt across the entire industry, from the developers of the casino games to the resorts and it will take at least a year, or even two, for the Australian gaming industry to completely recover.
These are all very concerning factors both an individual perspective but also from an investment perspective. How quickly the industry will bounce back will depend on how coronavirus evolves over the coming months.
Fact#3 – An incredible number of job losses
In recent statistics, it is estimated that close to 195 million people could find themselves out of work as a direct result of COVID-19. This is a simply staggering figure, and if that didn’t hit home hard enough, other reports indicate that almost half of the global workforce will be left unemployed in the near future. Needless to say, these figures aren’t exactly a sign of economic expansion, and they certainly aren’t indicators of a stock market bull run.
Any investor would look at this and usually run a mile, which is exactly what many are already doing.
Fact#4 – Government bailouts
Never before has the world heard terms like stimulus packages and furlough schemes, yet they have become the common talk in today’s society. Nations all around the world have had to put together incredible financial packages to avoid economic collapse, and this leaves economies particularly exposed. After all, this money isn’t just given out without any ramifications. It has to be paid back in many circumstances, and it has taken funds away from other economic sectors merely to keep the economy going.
We are quite literally talking trillions of dollars here, and when you consider this alongside the other indicators of this article, things are not looking too good. Some investors are still viewing the stock market as a place for great bargains right now, but many are being cautious – and with good reason.