How the Coronavirus is Affecting the Global Stock Markets

The movements of stocks and shares can be difficult to predict in times of crisis, particularly when that crisis impacts almost every country in the world. In the months during which the world has struggled to contain and eradicate the coronavirus, huge changes have been occurring within the investment world. Stock markets have become increasingly volatile and resources have boomed and crashed to an historic degree. So, what are the major developments that have affected our global stock markets? Where is it best to invest in these unprecedented times, and what will be the impact of this crisis moving forward?

Safe Haven Assets

Certain investments are increasingly sought-after during difficult times. Gold, oil, government bonds, the American dollar, the Japanese yen and the Swiss franc are likely to become highly popular depending on the nature of the difficulties being experienced. Due to America’s struggles with the virus, the yen and the franc are both performing well. However, as it is not directly governed by any territory, gold is coming out on top as one of the most popular safe haven assets in 2020. Pharmaceuticals and supermarkets have also attracted considerable investment due to their heavy involvement in the battle against the disease. Oil, however, has crashed in value due to the significant reduction in both production and demand.

Strategies

One particular trading technique has been the subject of a considerable crackdown in recent weeks. The Financial Conduct Authority has tightened regulations surrounding shorting stocks, with the approach totally banned within some territories in recent months. This ruling occurred as part of a strategy to prevent the value of stocks and shares being driven down, which might otherwise have resulted in a considerable crash.

Volatility

In the early stages of the pandemic, panic buying caused extreme volatility within many of the world’s markets. In countries where this activity has subsided, the value of certain stocks has settled somewhat, but there is still a great level of uncertainty. The S&P 500, Dow Jones and FTSE 100 all dropped by up to 30% from February onwards. In March alone, large drops occurred four times with circuit breakers kicking in to halt trading each time.

Trading Floor Closures

In one major move, the New York stock exchange – the biggest in the world – closed its trading floor between 23rd of March and 26th May, with numerous changes coming into effect in order to protect traders from infection.

Looking Forward

Although the S&P has gradually started to climb once again, it will take a considerable amount of time before global stock markets are able to fully recover from this crisis. Due to the nature of the virus and its varying impact on different territories, it is extremely difficult to judge exactly how long we will need to wait before trading returns to pre-COVID patterns. Many experts predict that a significant recovery could take between 1.5 and 4.5 years, but, as the crisis continues to progress, it is difficult to confirm at the present time. Things will be put back even further if countries experience second waves or other virus-related setbacks.