CoronaVirus pandemic is sending chills down to every person in the world. And it is affecting the business models across the globe.
The novel COVID-19 virus started in November 2019 in Wuhan, China. It has now spread its wings in every corner of the Earth. So, it is leading to the global crisis, and all markets are falling prey to it.
Markets world over are witnessing a historic downfall. It has never seen the single dip of a considerable percentage.
Even during the recession in 2008, people managed to hang in there because businesses were functioning. Let us discuss the type of markets and causes, effects and solutions to restore normalcy during these trying times.
How and why are stock market suffering due to Coronavirus (Covid-19)?
There is no stock exchange which is not bearing the wrath of the virus. Work is not happening in many companies as they are shutting following the precaution. Production has mostly gone down. Also, people are not moving out to buy. Hence, the demand and supply ratio is getting hit poorly.
People are losing their jobs. And due to this, the liquidy and cash flor is drying quickly. However, stock markets are functioning, but predictions and speculations are falling flat. The foreshadowing of the economy is taking a toll on overall all health of countries and their business modules.
Reasons why stock market are suffering
A market, business, or industry can only blossom in a conducive atmosphere. The stock markets need fertilizers of belief, passion and flowing economy. A slightest of the hindrance can change the course of strategies, and stock exchanges take plunges. Here, are some reasons that lead to the correction and downfall in stock markets.
There are instances when, in the absence of proper political guidance, businesses feel clueless. Such feeling transpires in traders, and the vibe spreads quickly than forest fires. No one wants to stay in uncertain conditions. Hence, people start exiting the market by selling off their shares. Foreign investors are always in doubt. When they find an iota of problem searing up, they pack up their bags for the safety of their money. So, when there are elections, and the favourable party wins the election, stocks jump otherwise fall.
When the government of a nation is unstable, or there is a coalition government in place, the policy reforms hinder. The vested interests overpower the potential for decision making. Necessary amendments require strong force in place.
Due to populist decisions of political parties for vote-banks, the market has to suffer. It takes away the rights of industrialists, who are job creators as well. Because of such a situation, investors withdraw their hands, and the market shatters.
If the government take a step without consulting the industrialists or employers, then it can have an adverse impact.
Experts’ take on stock market rebounding
The stock market experts believe that COVID-19 is doing massive cajoling with the industry. Any share that loses the market beyond 60-70 per cent has a robust chance to recover. And the small-cap stocks have to bear the biggest brunt. Large-cap companies have enough securities, resources and fundamental to improve.
However, they also go through the loss of around 30-40 per cent. But with time, they can get over the fall and regain their lost glory. The fear of bankruptcy forces investors to draw their money out of the economy. And the market does not slip because of some small traders. It is the ones with large capitals who take the calls. Most of them are owners of some multinational companies.
Some trade pundits believe that it may take up to six to nine months for the market to bounce back. Experts’ prediction may not be accurate because the world has never faced the calamity before. Some lessons will be learnt. Concrete steps can help in mitigating this hazardous situation which is invisible. Moreover, in the absence of a vaccine, the stability in the market does not seem viable shortly.
So, the whole point is, when the market goes down a certain level, the comeback tends to zero. In that case, staying away from such stocks is the best way to avoid risk. But some people see it as an opportunity, which it is not. Keep a close watch and keep the money aside for a while. These strategies may seem challenging to adopt, but it is better than making a loss.
Is it an opportunity for investors?
Whenever the market is at the lowest, people cite it as a chance to invest in the stock exchange. Likewise, the market also responds in a positive direction. There is a graph which goes up and down, which completes the cycle. But that happens in the normal process. The application of money would go waste in the epidemic. The period of lockdown and quarantine due to epidemic means becoming extra cautious of the situation.
Is it right time to invest in the commodity market?
Commodities are daily essentials. And people need them to survive during the trying times they are facing. The commodity market gets the kick from people purchasing everyday goods in physical form.
The essential material consists of all food products, oil, precious metals like gold, silver, platinum, palladium. Eatables include rice, wheat, soybeans, cotton, sugar etc. In livestock, cattle, lean hogs, to name a few. Natural gas, gasoline, crude oil get traded in the market.
Most of the commodity market products are finding takers in investors, but natural resources are losing it altogether. Due to cars off the roads following lockdowns in several countries, crude oil is seeing a historic low. The non-requirement of oil is taking a toll on its prices, and investors are running away from it. Traders who are showing faith in it have lost a lot in it. But there are hopes that it will bounce back. So, besides patience, if crude oil goes even lower, it won’t be a bad idea to invest in it. But it should be minimal and analytical.
Shifting from stock markets to commodities
Looking at the capacity of the commodity market, everyone is taking refuge in it. Almost all the goods are performing well. Gold is rallying at all-time high points. And it is the next significant asset everyone for which traders are setting their eyes for investment purpose.
Gold is finding clients who are mostly into bear run markets and have a fear of losing their money. After all, the metal has a golden past of reliance and reliability.
It has won hearts, and every country relies on it for minting notes. Gold is the standard parameter set for the printing of currency notes. The metal has usage to suppress rising inflation through the hedge. Plus, it does not rot, and the quality remains intact. People can buy it in physical form and sell whenever it pleases them. However, as the safety scope, buying it virtually is not a bad idea.
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It is tough to conclude which financial market is the best for investment during the Corona Virus. But putting a stake in a company’s share may not be a wise decision considering the market move. Commodities are reliable and essential for survival, whereas the stock market is for mere earning. But there is a lot of risks involved in the stock market. When the situation gets normal, share markets will open for trading and proper investment. For now, gold seems a better option.