As the COVID-19 pandemic continues to disrupt the daily routine of civilians, the markets themselves have been hit especially in the beginning. However, we are now seeing an uptick in marketability for the companies within the tech industry. Our own Rob Morgan went on CNBC to discuss the market’s response and investor strategy in the face of the pandemic
The World Health Organization (WHO) officially declared the coronavirus outbreak a global pandemic on March 11th, as the epidemic has now spread to 100+ countries. Infections beyond China are currently accelerating exceeding 200,000 with the contribution at more than 81,000 of China, as of March 18. As coronavirus spreads in the neighborhood level, public health policies are shifting from containment’ into reevaluate’ and/or mitigation.’ This approach accepts the concept that the virus will spread in society and highlights slowing scale and the speed of the diffusion procedure.
The U.S. market is estimated to contract by 14 percent in the second quarter, after having a 4 percent contraction in the first quarter, before recovering to 8% and 4% growth in the third and fourth quarters. Euro area GDP will endure a much deeper contraction, with double-digit declines of 15 percent and 22 percent in the first and second quarters, before rebounding by 45 percent and 3.5% in the fourth and third quarters.
The epidemic has also weighed on global financial markets, which have witnessed a synchronized sell-off in stocks, bonds and commodities as investors, businesses and financial institutions have hurried to increase cash in an effort to assist buffer themselves in the widening economic damage caused by the virus. The rout in U.S. stocks has erased nearly a third of their value at the three big equity benchmarks over the last month.
Policymakers take action beyond monetary policy to cushion the demand drop, keep firms solvent and prevent a seizing up and are behaving in unison. On the evening of March 15th, the Federal Reserve (Fed) slashed its target range for its Fed funds rate by 100 basis points to the zero lower bound and also unveiled a massive bundle of measures which includes buying assets ($500 billion of Treasuries and $200 billion of mortgage-backed securities), lowering the rate on discount window loans, decreasing required reserve ratios to 0% and reducing the cost of cross-currency dollar exchange lines.