WuhanCoronaVirus Crisis
The Wuhan Corona virus crisis was building up since September 2019 in China when cases were discovered and subsequent lockdowns were imposed.
Yet somehow there was hope that this crisis will be tackled. That hope did not prove right as the virus spread rapidly across the globe - in the begining 2020.
Initial reaction was of disbelief and then as reality hit markets went into a steep fall - perhaps unprecedented. The only similarity -at least in the last 20 years- being that of the 2008 crisis.
NIFTY - past 1 year. Notice the sharp fall and rise of Nifty, due to the crisis.
Lockdown and further
As the world went into lockdown - economies of countries shrank - as factories stopped work and economic activity came to a grinding halt.
Central Banks of various countries - led by the US Fed (being the largest central bank in the world) released money into the world economic system.
This was to limit the economic impact of Wuhan Cororna Virus crisis. Much of this money was provided in the hands (bank accounts) of people (especially in developed countries led by the US) as a compensation of loss of job due to the economic shutdown.
Solid Ground
As the world economies started easing the lockdown and economic activity came back, confidence returned. This - along with a lot of money released in the world economic system - resulted in world markets moving up.
Stock prices further surged in August 2020 as investors cheered positive news of a potential Covid-19 treatment.
The month of August 2020 also saw a series of strong economic reports including increase in manufacturing activity, better than anticipated factory orders, and a lessening of new jobless claims.
Notching Highs
The S&P 500 index finally achieved a record high in the third week of August thus completing the fastest bear recovery in history.
The Nasdaq Composite, having set multiple record highs during the same week also ended the month of August at a record high.
Many Global market indices moved in a similar manner.
Emerging market indices, August 2020 & beginning of year till 31 Aug 2020
What next?
The US election season os moving into high gear as November draws near. Historically, since 1992 markets have been volatile before elections.
In fact in 2008 (because of the credit crisis in US) the US markets fell 20% before the US elections.
Other markets in the world have no such worry - so chances are some money may move from the US markets to other markets. Yet US being the largest market in the world - if the US markets are volatile , it is unlikely that other markets rally significantly.
Moreover the US presidential election is widely regarded as a "global" event.
The one hope is a vaccine - which can provide a further flip to the market.
Yet the chances of a vaccine coming very soon ( in a month or so) is unlikely.
Do not loose sight
While past performance is no guarantee of future results, investors need to prepare for some volatility - without loosing sight of one's overall investment strategy.
Thats the key.
(Disclaimer : This blog is for information and educational business and not to offer any kind of advise or make any recommendations or solicit any business of any kind.)
