COVID-19 Impact on the Global Stock Markets

COVID-19 Impact on the Global Stock Markets

Adithya Mokshagundam,21-May-2020

Stock Market is a place where uncertainty is the norm, especially during the times of an unfavourable market. The one where the chaos theory of “A butterfly’s wing can cause a hurricane” is the most appropriate comparison. We can observe it in the current situation of corona and the impact it has on the stock market across the globe.

Let us look at how the markets responded during the last 3.5 months, from the day when the first case was reported.

During the initial stages, when the cases are low, the stock market had no changes. However, once the cases were beginning to rise, the markets fell by a considerable margin. Even though the case increase is not uniform across the countries, the trend in the fall was similar in all of them. The times were different, case numbers were different, the approach of governments was different, but the markets reacted the same across the world. This shows how interconnected we are as a common global market.

Later, once the government started announcing the relief measures and the clinical trials began, there was a phase of improvement in the markets. But the cheer was a short-lived one. However, the significant difference, later on, is the way they became used to the new normal. Once it is understood that the vaccine will take time most of the governments focussed on kickstarting the economy and preached the way of “live with the virus”.

The stock market understood the sentiment and started stabilizing and operating as though the virus does not affect. But this is only the beginning as the impact of the virus is not yet gone and there is a revival expected due to easing of restrictions.

Though the pandemic affected most of the sectors very severely, there are some sectors, especially tech-related, which could ride the wave and emerge stronger. This is quite apparent in the way the Nasdaq index, a tech-heavy one, went back to the original levels. We are hopeful of a bright future but be wary while investing today to avoid catching a falling knife.