Stock
Market Recovery
The
stock market is recovering from virus pandemics
Capital
markets have been mainly in terms of internationalization.
Money is easy to move and goes where you expect the
highest return. This means that the world's stock
exchanges are becoming increasingly interconnected. The US
Stock Exchange holds a special position through the US
influence on the world economy. Therefore, the development
of the Swedish stock exchange is largely determined by
what happens in New York.
Corona pandemic means that all financial assessments are
currently characterized by great uncertainty. No one can
say for sure how long or deep the decline will be, but a
common feature of the forecasts published so far is that
they point to a steep fall during Q2 and also into Q3 this
year.
The Corona pandemic has caused the world economy to suffer
from a demand shock and a supply shock at the same time.
Demand has fallen both because of the restrictions imposed
by states and because people have changed their behaviour,
for example by postponing larger purchases and reducing
their consumption in general. Besides, companies often
choose to postpone investments in this uncertain
situation, which also reduces demand.
Supply disruptions have also occurred in the supply side.
Closed borders, high sickness rates and quarantine staff
have led to reduced international trade and a reduced
supply of labour. It has become more difficult for the
industry to import inputs, which has created bottlenecks
and stopped production.
The combined supply and demand shocks mean that GDP is
expected to fall steeply in the coming months. The
forecasts published so far show relatively large spread -
a reflection of the uncertain situation - but in common
they expect a decline this year (first half) and then,
relatively soon, the beginning of recovery at the end of
2020 and next year. However, the decline this year seems
to be so deep that the recovery to a more normal business
cycle will take several years. All in all, this means that
we are now facing a very deep recession. This is due to a
high unemployment rate but with a recovery in the latter
part of 2020.
Sars
2002-03, Swine Flu 2009 and Covid-19 2020 1
The
stock exchange in Sweden
The
pandemic beats the entire world economy. Sweden is an
export-dependent country and a future recovery in Sweden
is thus not only dependent on how the spread of infection
develops within the country but also internationally. We
can draw comparisons with the swine flu outbreak in Mexico
in 2009 and that hit an entire world.
How has the Swedish stock exchange performed in
different virus outbreaks?
The
month before the Sars outbreak in 2002, which was also a
variant of Coronavirus, the Stockholm Stock Exchange had
gone up ten per cent. In the coming week, investors were
still not rescued by the virus. In fact, after a month,
the stock market had only gone down 2 per cent. The real
downturn came only later. After three months, the WHO had
issued a global alert, thus issuing a global health
emergency. The stock market was down 11 per cent since the
outbreak and was still at minus 4 per cent after six
months. The outbreak caused about 8,000 cases, of which
more than 750 people died, according to the Swedish Public
Health Authority. Today, there are over 2,000 dead
(Population of 10 million) and mainly older people. By
looking at Sweden, one can conclude what can happen when
countries release their quarantines and spread the
infection again. More dead but no extreme numbers and a
disease picture of 3-4 weeks or not at all for 80% of
those who get the virus.
In the spring of 2009, news spread that 60 people in
Mexico City had died from what was described as a mutated
form of swine flu. The month before, the stock market had
risen 16 per cent, and here too the upturn came. After a
month, the stock exchange was unchanged after first baking
something. Although the virus overall caused many deaths,
the fear diminished as it spread. The market had therefore
recovered and was up 13 per cent three months after the
outbreak. By then, WHO had issued a global alert. The
number of deaths is estimated at approximately 285,000
people. The new Coronavirus was discovered just before the
New Year. In this case, too, it was a positive trend on
the stock exchange before the outbreak. The month before,
the stock exchange had risen 2 per cent. Even though the
stock exchange has made a downward indication that the
virus continues to double its spread every other day, we
can note that the stock exchange still stands reasonably
well since the outbreak became known. It has come to light
that the virus began to spread far earlier, but it is the
moment when it became widely known that is the important
thing here.
Jan
Rejdnell 1
There
is thus a lot of evidence that after the summer months of
June-July the stock exchange can start coming back again
with vigour. A company that is now taking note of a
well-documented valuation can look forward to being
included in a general rise in prices on the international
stock exchanges, and especially the development of the
American stock exchanges. The United States cannot keep
the country "closed" for an extended period for the
creator of gigantic unemployment and recession that
harvests more lives than today's Coronavirus.
Jan Rejdnell
contact us
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1
How the stock market has performed during past viral outbreaks
2
Exchanges/lists
Past
performance is no guarantee of future results.
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for loss.
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