There can be no doubt that the socio-economic impact of the coronavirus pandemic has been huge, with the global economy projected to contract by -4.9% by the end of 2020.
The world’s major indices have borne the brunt of this impact, with examples such as the Dow Jones Industrial Average and the S&P 500 having endured significant peaks and troughs since the end of Q1.
In this post, we’ll chart the impact of Covid-19 on major indices throughout the year, while asking what could be next as 2020 draws to a close?
Global Shares in Flux - The Rise and Fall of Stocks
The global stock market was booming for much of Q1, but this trend came to a shuddering halt once the coronavirus had spread outside of Asia and been declared as a global pandemic.
The latter announcement definitely heralded significant shifts in international stock markets, with record breaking quarterly drops following a relatively bright and breezy start to the year.
March 9th saw the first market crash, which caused the Dow Jones to endure a staggering 1,300-point drop. Associated oil prices fell at a similar rate, while similar indices also shelved value and even big tech stocks on the Nasdaq 100 saw their prospects dwindle.
While a brief period of recovery followed, March 12th saw the market downturn come to a head, as investors reacted to the exponential global spread of coronavirus by engaging in large-scale sell-offs. At this time, the Dow Jones shelved a further 2000 points, in what was declared by The News International as “the biggest ever fall in intraday trading”.
During the same period, the Nasdaq lost more than 620 points, while the S&P 500 lost 7.6% of its total value. We also saw oil prices fall at a dramatic rate, with Brent crude tumbling by 22% in less than 24 hours.
How have Indices and Stocks Recovered in Q2 and Beyond?
Despite a pronounced (albeit smaller) decline in September (when major tech stocks once again saw their valuations decline noticeably), global indices have largely rebounded since March and showcased relatively impressive levels of performance during Q2 and much of Q3.
In some respects at least, this can be attributed to the role of retail investors and platforms such as Oanda, the former of which have managed to hold their nerve during large-scale sell-offs and rely on a sense of determinism to avoid causing further market declines.
This demographic is mostly represented by individual investors, who may have smaller holdings and a greater willingness to hold firm in the wake of sustained market decline.
It can also be argued that flexible investment vehicles such as CFD trading have also empowered the market’s recovery, as these enable individuals to speculate on price movements and achieve a profit without assuming ownership of a particular asset.
With this in mind, it should come as no surprise that retail stockbrokers have reported record trading volumes throughout 2020, as individuals have flocked to shares and indices in a bid to optimise their potential returns despite the wider economic tumult.
This trend could well be set to continue in the near-term, particularly as individuals look to “buy the dip” ahead of further movements in the months ahead. It’s important to approach shares with caution, however, while committing to executing trades based on both market movements and the wider coronavirus pandemic.
