How Is COVID-19 Affecting The Global Economy

All kinds of businesses are profoundly impacted by the current coronavirus situation. The consequences for the global economy following the Great Financial Crisis in 2007-2008 were bad but what follows the pandemic are even worse with a brief interruption of some businesses and events slowing down for others. It is impossible to say accurately what would be the economic damage from the global COVID-19 novel coronavirus pandemic but economists widely agree it will impact the global economy very negatively.

Initially, it was predicted that a global pandemic like this will make most major economies will lose a minimum of 2.4 percent of the value their gross domestic product (GDP) over 2020. It leads economists to already lessen their 2020 forecasts of global economic growth from about 3.0 percent to 2.4 percent. But it was predicted before COVID-19 became a global pandemic, and the extensive restraints on social contact were implemented. The global stock markets have suffered intense falls since then.

China, the second-largest economy worldwide is the first country to suffer from the impact of Covid-19. The lockdown required the shutting of various manufacturing companies and retail businesses or decreasing their activities due to which the Chinese economy has been slowed down extremely. A revenue drop has been seen in more than 95 percent of the 299 large manufacturers on March 6^th as per the report by the China Enterprise Confederation (CEC).

Most investors anticipated the 11-year bull market at the beginning of the year 2020 but the spread of COVID-19 made the Dow fell from record highs to bear-market territory just a few weeks. The ambiguities surrounding COVID-19 by April 2020 made investors unable to predict the economic impact which leads to fear and extreme volatility.

COVID-19 Goes Global

The World Health Organization (WHO) officially declared COVID-19 a pandemic with cases in more than 150 countries. Almost 900,000 COVID-19 cases have been reported globally by April 1, 2020, with a death toll of more than 44,000. More than 185,000 patients have recovered and about 3,000 fatalities took place in the U.S so far.

China has quarantined about 600 million people which has lessened the progression of the outbreak. However, the virus has spread in the rest of the world including the United States and Europe. The difficulty in predicting its economic impact has to lead the stock and bond markets to enter into a phase of acute volatility impacting global markets and the economy.

Impact Thus Far

Until the virus is controlled, risk assets continue to be susceptible to additional selloffs. However, the pandemic has increased the demand for medical items including face masks and test kits to prevent spreading and/or contracting the virus.

The news through other risk assets hints towards earnings weakness in the first part of 2020. For instance, Nike’s production depends heavily on China, resulting in fears of an earnings dip as a result of the supply-chain disruption. Half of 4,292 Starbucks stores in China had to be shut and Apple has started to look for substitute suppliers who can cover up any production losses.

However, China continues to gradually decrease its infected count as it is hitting its peak with new COVID-19 cases. Apple CEO Tim Cook is hopeful about the company’s Chinese supply chain bouncing back. The majority of the locations of Starbucks has reopened.

The number of those infected is constantly increasing, even though people throughout the world remain quarantined and experts globally are working on finding a vaccine. More economic pain can be expected in the U.S. and abroad with virus control procedures reducing economic activity.

For instance, trade shows and business conferences are calling off events worldwide. The giant The Inspired Home Show in Chicago which brings over 60,000 attendees globally was canceled. Vacationers are rescheduling trips, and travel is canceled by many businesspeople. United Airlines canceled 10% of its upcoming domestic flights and 20% of its international flights.

To keep as many Americans safe and uninfected as possible, cautionary action has been taken on the federal, state, and city levels. Social distancing needs to be practiced by everybody in the near future to decrease the spread of COVID-19.

The Future Of The Markets Amid COVID-19

The market is troublesome which means new strategies that benefit from volatility need to be adopted by the investors. In a week, the market has reached from a record high to correction territory and then in a day rose 4.2% as the focus went to Joe Biden’s resurgence in the Democratic primary.

There is an ambiguous effect of COVID-19. In such cases when constant volatility can be highly probable, then policies that improve returns should be employed, whether the market shoots up or down.

In order to make sure than you don’t panic sell or purchase due to FOMO (Fear Of Missing Out) or FOLE (Fear Of Losing Everything), it is better to turn to a trusted financial partner. The key is to be patient while making decisions based on wisdom, not emotion.

Volatility can offer a prospect for market-beating returns. Use a strategy that helps you to make money in volatile markets irrespective of which way they turn. The volatile conditions provide a chance to guard against downside risk and grow revenue. COVID-19 will keep on affecting the markets, but navigate through this period of uncertainty, everyone should remain vigilant.