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Will Stock Markets Recover

The global coronavirus outbreak had a significant negative impact on the financial world. As per the latest data, the portfolios in S&P 500, declined by 22%, while the Dow Jones Industrial Average is also suffering from the crash. Coupled with the price war on oil, you may feel that it will take a while for the economy to recover.

Are the government’s efforts enough?

Even though there are efforts by various parties to help every industry, this hasn’t been enough to make a significant change in the stock market. The Federal Reserve came out, stating that they will be purchasing Treasury securities, to ensure the market functions smoothly.

At the same time, the federal government also stated that they would be buying corporate bonds. The goal is to ensure credit flow to businesses and consumers. Even though the $2 trillion packages seems like a great move from the government to stimulate the U.S market, it may still not be enough.

The reason is that there should be long-term solutions, rather than an immediate cash injection, whose effects will be temporary. At present, there is panic among investors, as it seems like the market will take a long time to recover. One reason is that Dow lost 34% of its value, the first time the finance market is experiencing such a considerable descent since The Great Depression.

To mitigate their losses in the stock market, they are resorting to the practice of selling their assets first, rather than remaining patient in the chaos. However, you should remember that the economy can recover.

It may be challenging to remain calm and composed in the turbulence in the market. After the outbreak starts to settle, every investor will practice caution. They don’t want to invest, due to their previous experiences with the market. This phase will be the biggest challenge for the stock market industry, as it needs to overcome this situation to arise.

When will the stock markets recuperate?

How long will it take before the market starts to recover? To understand the timeline, it is essential to look at the market data. As per the latest estimates, this is going to take anywhere between 22 months – 32 months.

It is also crucial to remember that the stock market survived the deadly recession in 2008. A year after the crash (March 2009) the US GDP started to decline in value. Every quarter, this was the same story. Many investors didn’t see a future in the stock market. However, the industry was able to bounce back, due to the change in the economy.

The current epidemic can make you think twice about the stock market. However, this is normal behavior and will continue to remain until the governments can control the spread of the disease.

The figures you see on the stock market recovering are just estimates from the available data. Again, you must remember that the economy always bounces back, despite facing significant challenges.

If you want to make the best financial decision at this moment, look for companies that offer assets where you can earn in the long. They will become prosperous at the end of the outbreak.

April 3, 2020

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