Let me start this off by saying that the financial implications are the least serious when it comes to COVID-19. For those who don’t know, COVID-19 is the name given to this specific strain of the coronavirus that has recently sprung up in China and spread around the world. With that out of the way, it is important to point out the worldwide financial issues that arise from something like this. The US stock market has seen a massive dip, and the fear surrounding the coronavirus is the primary driver. To help inform you as to why, and how to take advantage of it, let’s break down the reasons.
China is the world’s largest exporter, and the spread of COVID-19 has caused many companies to cease operations for the time being. Even those firms that chose not to have been slowed down by the virus. As a result, many Chinese exporters are missing deadlines, and this affects everyone that relies on these products around the world. As a massive manufacturing power, China’s woes have the potential to mar commerce worldwide. This makes investors more wary of investing in companies that rely on China (pretty much everyone in the S&P 500). Being that the large firms that have this reliance are the primary markers for the success of Wall Street, this results in horrible optics in the market.
When the fear of a pandemic is rampant around the globe, people are much more pensive about going out in public. This can seriously damage retail sales for a lot of companies, as people in affected areas will not be spending as easily. When more people are out and about, more consumption takes place, and share prices rise. Without this purchasing activity, companies lose out on brick-and-mortar revenue. Even for online retailers, fears of possible exposure limit trust in products from affected regions. Along with that, fear of possible medical expenses make consumers less fond of parting with their extra cash.
Main Takeways: Separating Panic from Truth
The primary message here is that this will not last forever. In fact, many economists think the market is already in recovery mode. If we trust these experts, now may actually be a great time to buy stocks if you have some investment money put away. Knowing that the stock market will probably dip around election season again, it’s all about how long it takes for the coronavirus to calm down. If it is a quick recovery, buying now and selling once the market recovers could be a very lucrative decision. On the other hand, if this dip lasts through election season, it could be a long time before the market snaps back. The Dow being $26000, as it is right now, was a pipe dream for a long time before 2018. There is a chance that it never snaps back, so keep that in mind before investing.