This article continues a special series titled “Creating Resiliency During the COVID-19 Crisis.”
This series is brought to you by Consultants Collective member consultants, advisors, coaches, and Biznology contributors whose experience and expertise includes risk and change management, Asia, China, offshoring, leading distributed global teams, managing crises and internal communications, deploying and managing online collaboration tools that enable people to work together virtually, developing new models, as well as expertise in innovation and design-thinking, work-life integration — and more — all of which uniquely positions Consultants Collective to serve its clients during this time. We hope this series is a valuable resource to you and your organization as you tackle the challenges presented by this global public health crisis. If we can provide additional help and support through our executive consulting, advisory and coaching services, please contact us.
In the wake of the current coronavirus pandemic, the whole world has felt the inevitable sense of fear and uncertainty. Arguably, the sector that faces the most damage is the global market. The biggest question on everyone’s mind is “how much damage can actually this new virus cause to the global market?”
Fear and panic
The coronavirus outbreak has caused nothing but fear and panic, and the market is no exception. The sheer volume of trading has been largely indicative of the level of fear that has been present in the market lately. It seems that even Wall Street has been affected by this sense of restlessness and paranoia as well. Wall Street’s VIX Index or “fear gauge,” as they call it, has risen up to 78 earlier this week. This level has not been seen since the global financial crisis.
Investors’ expectation for the 30-day forward-looking volatility is a tradeable index on the Chicago Board Exchange, marked by huge swings up and down. It’s just another way of saying that it is a financial market weather forecast. It is created to predict potential storm clouds, but also lighting and thunder that wait ahead.
The current level on this “forecast” shows that the stock markets are to be anticipating a global recession and a US recession as well. That’s already bad enough, but, luckily, the forecasting is not currently predicting the chance of it getting any worse than that, not as it did after the 1929 stock market crash.
What the market is saying about the Australian economy
What about Australia? The next logical question would be: If stock markets are pricing in a potential global recession, what are the movements on the ASX predicting the Australian economy? They are essentially predicting the same thing as for the rest of the world. As it has been recorded recently, the All Ordinaries Index and the ASX200 have fallen for about roughly 25 to 30%. And that type of market damage is consistent with an economic recession.
However, the market can’t simply move down all at once. It has up days and down days as well. The volatility that has been spotted on the market throughout the last week is set to continue, according to the stockbrokers. There is a high possibility of a market-moving anywhere between 3 and 10% each day, depending on the news flow.
Share market is pointing the way
That is the crucial point of everything that has been happening so far. Even though it has started as a health crisis, it has inevitably produced the beginning of both an economic and financial crisis as well. Though we haven’t quite reached the financial crisis yet, the investors all around the world are trying their best to predict when that might happen.
Tuesday’s market resurgence is a perfect example. Market participants are taking heart from the news of a potential cure for this new virus going around the whole world, and then they are hunting around for stocks or securities that look like “cheap” now. And these have been heavily sold in the past few weeks already. That is why, in these critical times choosing a company such as General Carrying that makes sure its customers get the highest-quality service and electronically secure, storage-specific premises in a safe, clean environment, is very important.
The financial foundation has been set for an almighty rally in stock prices. And since the outbreak of coronavirus, the extraordinary amount of central banks and government stimulus has been put into the world economy in the past few weeks. That being said, the central problem is still, however, here and it’s facing financial markets. It is inevitable that the coronavirus pandemic has the potential of causing bot a financial crisis and a serious global recession.
What to look for
Lastly, people are wondering what they should look for. Shane Oliver, AMP Capital’s head of investment strategy, is responsible for looking after billions of dollars’ worth of client funds. For now, that is his central focus and concern.
Without a doubt, a constantly growing number of COVID-19 cases all around the world as well as the spreading lockdowns will inevitably continue to dominate in the weeks ahead of us while the investors are still trying to estimate how long it will take us to contain this virus outbreak. They are also trying to assess how bad the consequences of this virus will hit economic activity.
The bad news is that the new metric for global financial markets is predicting an increase in the number of COVID-19 cases. Even though every day brings more hope and evidence that this virus will efficiently be contained, the economic outlook still deteriorates.
However, the good news is that big financial institutions, that possess billions of dollars on the line, are studying these numbers carefully and taking a deep look into both central banks and government responses. Their overall daily market activity is essentially a window into how they see this global health crisis and its effects on the economy, our job security and hip pockets.
Conclusion
In conclusion, the forecasting can more or less help us get prepared for what’s coming, but fear and panic won’t do any good. As hard as it is, staying calm and thinking rationally is what we all need to do for the good of all of us.
