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How Corona Virus is affecting the Stock Market in the US

Covid 19 has emerged into a global emergency and the US is no different. It has not only taken lives but also livelihoods and life savings. Within a few days, it has wiped out all the stock market gains of the US since Donald Trump took office in 2016. The early minutes of Monday saw S&P 500 drop by 7.4% and forced a temporary halt in trading while the Dow Jones plunged 2,000 points, only to readjust to 1,865 points i.e. a loss of 7.2%. Even the NASDAQ showed a drop of 6.2% but the decline wasn’t over.

By Wednesday, the tumble of Dow Jones continued and it recorded a massive downswing of 1,300 points and closed lower than 20,000 in over 3 years. The market looks troubling now and while the pandemic has all governments take precautionary measures, no one trusts the market to recover any time soon.

A recent survey by Prudential captured the public sentiment and stated worrisome trends. Among the respondents to the survey, 45% were worried that Covid 19 would restrict their ability to do their jobs and 45% were troubled about financial losses and retirement savings due to the dip in the financial markets.

Government advisory has restricted mobility, office work, out-of-house consumption, and even production. The only hope is the quick resolution of the outbreak by the discovery of a viable Corona vaccine, else the strengthening of the dollar too cannot even out the losses.

The Corona Fallout on Economy:

Travelers have been advised to stay home and this has a serious negative impact on many service industries. The supply chain of many goods and services is faltering and key sectors such as oil and aviation have fallen drastically.

The Federal Reserve tried to control damages by snipping the target rate by .5% to less than 1.25% but the prolonged recession would make it hard for people to seek debt and borrowing, despite favorable conditions.

People are wary of investment, consumption, and debt and the virus has made it difficult to choose any one of the three. People are already behind on repayments for car loans, home loans, and business loans and Central bank steps to ease the interest rates may not suffice.

What Next?

A multi-billion-dollar aid package was approved by the Senate towards the budget for paid and sick leaves while the Federal Reserve has announced the revival of the Primary Dealer Credit Facility, an effective measure of the crisis-era that also eased credit burden on the dealer clients.

The Corona Virus has already resulted in 115 casualties and a patient count of over 7,300 and this has made the S&P lose 30% value since February, making this the most prolonged bull market period in the entire history of Wall Street.

Morgan Stanley has predicted that the global recession is inescapable with a fall in economic growth by .9% and the only solace is the strengthening of the Dollar if it can be translated into consumer and industry benefit. The dollar showed an upsurge for the third continuous day while all other currencies dropped, rising by 1%, the highest recorded rise since 2017.

April 3, 2020

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