Finance and Law

Are the Fluctuations in Covid-19 Cases Affecting the Financial Markets?

<p style&equals;"text-align&colon; justify&semi;">At its core&comma; the <a href&equals;"https&colon;&sol;&sol;newsforpublic&period;com&sol;facts-personal-loans-know&sol;">coronavirus pandemic<&sol;a> is a human health crisis&comma; and one that has had a huge impact across the globe&period;<&sol;p>&NewLine;<p style&equals;"text-align&colon; justify&semi;">More specifically&comma; we’ve seen a total of 37&period;5 million cases recorded globally as of October 12th&comma; with these resulting in an estimated 26&period;1 million recoveries and a little over one million deaths&period;<&sol;p>&NewLine;<p style&equals;"text-align&colon; justify&semi;">However&comma; a growing number of scientists and experts are forecasting that the socio-economic impact of coronavirus could be even more pronounced&comma; and there’s no doubt that everyone from entrepreneurs and financial traders will have begun to notice this influence during Q2 and Q3&period;<&sol;p>&NewLine;<p style&equals;"text-align&colon; justify&semi;">But are the fluctuations in Covid-19 impacting on the world’s financial markets&comma; and if so how&quest;<&sol;p>&NewLine;<h2>Charting the Stock Market Crash in 2020<&sol;h2>&NewLine;<hr &sol;>&NewLine;<p style&equals;"text-align&colon; justify&semi;">When the S&amp&semi;P 500 index peaked in February 2020&comma; the Covid-19 outbreak was largely confined to China and countries in Southeast Asia&period;<&sol;p>&NewLine;<p style&equals;"text-align&colon; justify&semi;">However&comma; the World Health Organisation &lpar;WHO&rpar; <a href&equals;"https&colon;&sol;&sol;www&period;euro&period;who&period;int&sol;en&sol;health-topics&sol;health-emergencies&sol;coronavirus-covid-19&sol;news&sol;news&sol;2020&sol;3&sol;who-announces-covid-19-outbreak-a-pandemic" target&equals;"&lowbar;blank" rel&equals;"noopener">declared coronavirus as a global pandemic on March 12th<&sol;a>&comma; causing huge ripples throughout the world’s financial markets and triggering a 34&percnt; decline in the S&amp&semi;P 500&period;<&sol;p>&NewLine;<p style&equals;"text-align&colon; justify&semi;">This type of sharp drop was also experienced by indexes such as the Dow Jones and the Nasdaq 100&comma; while it marked the kind of extreme volatility that was last seen during the depths of the great recession in 2008&period;<&sol;p>&NewLine;<p style&equals;"text-align&colon; justify&semi;">The question that remains&comma; of course&comma; is why what precisely drove this precipitous market decline&quest; After all&comma; the declaration of the WHO didn’t necessarily mean that a high volume of global cases was certain&comma; particularly as some experts had predicted the worldwide spread of the virus earlier during Q1&period;<&sol;p>&NewLine;<p style&equals;"text-align&colon; justify&semi;">However&comma; we must recognise that most financial markets work on sentiment&comma; while entities such as the foreign exchange are also impacted directly by a host of macroeconomic and geopolitical factors &lpar;we’ll touch on this a little later in the piece&rpar;&period;<&sol;p>&NewLine;<p style&equals;"text-align&colon; justify&semi;">In this respect&comma; the sharp market decline in March was precipitated by the rational anticipation of future Covid-19 cases and the global spread of the virus&comma; as traders reacted to this likelihood and planned their orders accordingly&period;<&sol;p>&NewLine;<h2>What Can we Learn from this and Future Market Trends&quest;<&sol;h2>&NewLine;<hr &sol;>&NewLine;<p style&equals;"text-align&colon; justify&semi;">Although the currency market is a little more complex&comma; various assets have been impacted by Covid-19 uncertainty and the potential for renewed cases and second waves throughout 2020&period;<&sol;p>&NewLine;<p style&equals;"text-align&colon; justify&semi;">No single fiat currency reflects this better than the US Dollar &lpar;USD&rpar;&comma; which despite remaining the world’s dominant reserve currency has <a href&equals;"https&colon;&sol;&sol;www&period;tickmill&period;com&sol;promotions&sol;welcome-account" target&equals;"&lowbar;blank" rel&equals;"noopener">continued to shelve value since the beginning of Q3<&sol;a>&period;<&sol;p>&NewLine;<p style&equals;"text-align&colon; justify&semi;">This was triggered by a continual rise of cases in the US and <a href&equals;"https&colon;&sol;&sol;thehill&period;com&sol;homenews&sol;sunday-talk-shows&sol;520498-stephen-moore-casts-doubt-on-need-for-22-trillion-stimulus" target&equals;"&lowbar;blank" rel&equals;"noopener">the prospect of a further &dollar;2&period;2 trillion stimulus package<&sol;a>&comma; which may ultimately be passed into law as a way of helping American citizens and businesses cope with the fall-out from Covid-19&period;<&sol;p>&NewLine;<p style&equals;"text-align&colon; justify&semi;">However&comma; the prospect of this measure is also weighing heavily on the value of the dollar&comma; by making it less attractive to foreign investors and reducing capital inflows into the US&period;<&sol;p>&NewLine;<p style&equals;"text-align&colon; justify&semi;">Such trends are likely to continue in the near-term&comma; particularly with a second wave of cases now being reported in Asia and fears that the previous cycle may be repeated as the virus spread throughout Europe and the Americas&period;<&sol;p>&NewLine;<p style&equals;"text-align&colon; justify&semi;">While it’s possible for investors in derivative assets such as currency to capitalise on market uncertainty and speculate on declining values&comma; the main concern for traders is that even small and seemingly insignificant events are having a direct impact on financial market instruments&period;<&sol;p>&NewLine;<p style&equals;"text-align&colon; justify&semi;">For example&comma; <a href&equals;"https&colon;&sol;&sol;uk&period;reuters&period;com&sol;article&sol;uk-health-coronavirus-trump-markets-inst-idUKKBN26N0IW" target&equals;"&lowbar;blank" rel&equals;"noopener">both US stock futures and European equities declined last week<&sol;a> after President Donald Trump and his wife tested positive for coronavirus&comma; with some shelving as much as 2&percnt; in value in less than 24-hours&period;<&sol;p>&NewLine;<p style&equals;"text-align&colon; justify&semi;">While this doesn’t necessarily impact on the long-term value of blue chip or mid-cap stock options&comma; it may undermine investors with a short-term outlook who are trying to optimise their gains by leveraging market uncertainty&period;<&sol;p>&NewLine;

Hardik Patel

Hardik Patel is a Digital Marketing Consultant and professional Blogger. He has 16+ years experience in SEO, SMO, SEM, Online reputation management, Affiliated Marketing and Content Marketing.

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