The global pandemic we’re facing is a tragedy in more days than one. Not only do we have to witness our kind succumbing to this horrible disease, but we also have to put out economic fires so the world doesn’t completely shut down. Because most countries are on lockdown to slow the spread of the virus, people face unemployment and markets crash.
Even though our priority right now is being healthy and taking care of our kind, we have to look at the effect the virus has on the global market, too. After all, this is the only way to ensure the world doesn’t fall apart once this enemy is beaten.
1. The issue
There are extraordinary things happening all over the world due to the pandemic, and most of them aren’t good. When it comes to the economic side of things, the ASIC stepped in recently and took control over the share market. This was done to make sure that the market remains orderly and fair. Even though the measures may seem extreme to some, they were necessary because the number of stocks ever traded on the Australian Securities Exchange was higher than ever last Friday.
The core of this issue is that the settlement system was reaching its processing limits due to the influx of users. To make sure trading can still continue, the ASX employees needed to work hard over the weekend. The entire market has the potential of being forced onto the sidelines.
This is just one example of what the market is like in the age od the pandemic. The strain is evident and investors are trying to get a handle on the economy and track it.
2. The panic
The fact that so many people are trading right now is an indicator of the level of fear in the market. Wall Street recently came out with a chart showing a high index of the fear gauge. In fact, the index rose up to 78 in the previous week, which is something it hasn’t done since the major global financial crisis.
Why is this relevant? Well, basically, this chart is the weather forecast for financial marketers. Thanks to it, they can predict what the market is going to be like in the future. Right now, it’s looking like the storm is coming.
In fact, some even say the stock markets are going to go into a global recession. Of course, this means the US market isn’t safe, either. Not to be the bearer of bad news, but experts also say that the market could be as bad after the crash as it was at the beginning of the great depression of the ‘30s.
3. How this affects the Australian economy
The Australian economy isn’t so different from the global market right now. All Ordinaries Index and the ASX200 have fallen by 25 to 30 per cent. This kind of market damage is consistent with an ongoing economic recession.
Of course, you should understand that the market has its up days and down days. The whole thing isn’t going to collapse in the span of 24 hours. It’s evident that most if not all industries will suffer because of this. For instance, we can’t even expect national warehousing and freight storage to be completely safe, either. The state of the global market and each industry will inevitably affect others.
Experts say that it’s possible to see the market move between three and ten per cent each day, depending on how the news flow.
4. The share market
The current health crisis has inevitably created an economic and financial crisis, too. The good news is that we’re not quite there yet. Right now, investors are just trying to navigate the situation and figure out when the crisis might happen so that they’re better prepared.
For example, the market resurgence on Tuesday can be traced to the fact most market participants believing the news about a possible cure for the virus. This leads them to hunt around for securities and stocks that have been sold heavily for weeks.
The government isn’t just sitting idly by, though. They’re putting in a generous amount of stimulus into the world’s economy. Central banks have contributed to the market with the stimulus, too. These actions in the past few weeks will ensure that the financial foundation is set for a rally in stock prices with just a hint of the pandemic getting under control soon.
Even though this is optimistic, we still don’t know what’s going to happen. The governments and central banks may have taken some precautions, but the coronavirus pandemic still has the potential to cause a global recession and financial crisis. Hopefully, it won’t come to that and the economic consequences we feel will be minimal. This all depends on the way the situation develops and how quickly the pandemic is contained. To do your part, make sure to stay inside and follow the advice of authorities.
Conclusion
As you can see, the coronavirus is very damaging in more ways than one. Covid-19 shouldn’t be taken lightly even if it does seem like just an ordinary cold at first. It’s up to us to act responsibly and protect ourselves and those we care about. This implies all the health measures and advice provided by WHO, but also navigating the global market and understanding how the damage will affect us after the pandemic is over.
