Covid-19 And The Share Market

COVID-19 and the Global Share Market

The benefits of a global economy have been touted and promoted over decades as countries seek opportunities to increase economic links with each other to the benefit of all. Free trade agreements have been established both bilaterally and regionally around the world with more in discussion stages. But when a pandemic such as COVID-19 hits, the negative effects of such a global approach are highlighted.

A factor clearly on display as stock markets reacted to different stages of the coronavirus outbreak at different stages and in different regions.

Understanding all complexities of stock market moves is for the expert analysts, but by keeping up with the business reporters on our news services, does provide a good overview of what’s happening.

We may be an island, we may be able to close our physical borders, but the Australian economy cannot cut itself off from the flow-on effects from other countries on our own stock markets. Retirees and investors have been in shock and horror as they’ve seen their nest eggs and for some, their source of retirement income, ravaged on a daily basis.

COVID-19 is having a dramatic impact on the stock market across the world with the overall assessment summed up as ‘volatile’. One day the Australian market starts down, then rallies during the day only to have a massive slide by closing. Next day, it opens high, drops slightly but closes higher. The gains of late 2019 have been severely eroded with only glimpses of recovery.

The Australian markets feel the pain from the US markets and unfortunately, some of their volatility is in reacting to tweets from the US President. Note in point, according to reports, President Trump tweeted that a vaccine had been found in a commonly available medicine and stocks rallied. Only for the information to be quickly refuted.

The aviation sector has been hard-hit by the coronavirus and stocks across the entire tourism sector have understandably taken a massive hit, not dissimilar to the fallout from 9/11. Australian banking stocks have been taking a hit also, as the government piles pressure on the banks to take a large portion of the burden of recovery in low or no cost loans, deferring mortgage payments, relief for landlords and other measures.

In early April, the authorities also ‘suggested’ that major companies should not issue dividends to shareholders for some stocks. Unhappy shareholders showed their disapproval for that suggestion with a quick sell-off.

While many industries have been devastated by the economic fall-out of COVID-19, some essential services sectors such as food suppliers, supermarkets, medical suppliers etc have continued to trade well. No doubt the pharma sector will surge when a vaccine is finally found.

The markets have responded intermittently and sporadically to news of various elements of stimulus packages, which has been good. In Australia, with social distancing measures firmly entrenched the flattening of the curve appears to be ahead of initial modelling. Many, if not all, Australians will be hoping that this is a sign that the country can enter the recovery phase earlier than initially thought and Australian stocks will lead the surge from red into green territory.