The economic crisis that has been brought on by the coronavirus is now reported to take 35% of the UK’s GDP this quarter, as the vast majority of the population remains under lockdown. However, in spite of this, the FTSE100 is holding up, having gained from its lowest point since the financial crisis.
On the 23rd of March, the DOW, NASDAQ, FTSE, and NIKKEI were all in a slump, and all of these indexes have emerged from the crisis relatively unscathed.
Analysts at Goldman Sachs are reportedly stating that they believe the 23rd was the lowest that markets will get, due to the COVID-19 curve flattening out in the majority of large economies.
This means that any further major shocks are not likely in the coming months, and the stock market can continue on the road to recovery.
However, the stock markets are arguably blind at the moment, and faced with a dilemma that has never been seen in Western economics.
Within a few weeks, a peacetime economy saw a huge proportion of its demand collapse and there isn’t any indication yet as to when it may return.
This means that in the short term, the stock market is likely to stay on something of a steady course.
If demand doesn’t return when expected or there is a second wave of the virus when lockdowns are lifted, however, the stock market may panic and indexes could see a drop as they did in late March.
Ultimately, this isn’t the ideal time to be a budding investor, as the market is likely to see several fluctuations in the coming months.
However, certain industries, such as airlines, are currently at a low price due to their bailout, but are guaranteed to not go under due to their protection coming from the government.
These protected industries could prove to be wise investments, as there is minimal risk yet a likely rise in the future once the crisis is over.
Although it may not seem that way at the moment, the economy will return to normal and stocks will rise again. It’s just a matter of picking those that aren’t at risk of sinking in the meantime.