After the bloodbath in month of March, stock markets over the globe have recovered sharply in recent months. If you look at the stock market levels right now, you won’t assume world is through a pandemic . Investor sentiments have improved dramatically.
But a fear is ruling on everyone’s mind. Will there be another market crash just like we saw in the march? Is everything on track now? Are we going one way up from this point without peeking back?
We will put forward some important points which you should keep in mind before taking any decision.
Why can there be another stock market crash?
While we may assume humans all over the world have started living with novel corona-virus COVID-19, fear is still ruling over their mind.
It seems stock markets are also reacting to positive news and ignoring negative, but how long will this continue. We have found some reasons which should not be overlooked when it comes to stock markets worldwide.
A second wave of COVID-19
Researchers and scientists all over the world are not ruling out a second and more disastrous wave of novel corona-virus COVID-19 that may hit all over the world around the end of 2020. New cases emerging in China may support this fact.
Keep second wave aside, even now the number of cases are surging rapidly and countries have not been able to control the spread of deadly disease.
Companies going bankrupt
There’s no denying fact the SME’s and MSME’s are facing lot of hurdles working there way forward, but some may succumb and file bankruptcy or insolvency. Event Enterprises with huge balance sheets have started feeling the effects and have started reducing the costs.
Increasing unemployment rate
If a company or industry shuts down or files bankruptcy, it results in loss of jobs for thousands of workers with it. Already unemployment has peaked in many countries.
Slow economic recovery
Countries are struggling to maintain their GDP’s. Rising unemployment, reduce in demands have resulted the countries GDP to make their way to lowest points in recent times.
If you peek through the recent market crashes in history, GDP’s have rarely moved this low.
GDP for India estimated to be around negative 2 percent in 2020 . Even during financial crisis of 2008, it was able to maintain around 3%.
Similarly for USA, predicted GDP has fallen to negative 10%.
Rising tensions between countries
Tensions between USA and China was already mounting over past few months be it through trade deals or blaming each other for pandemic spread.
But recent spike in tensions between India and China over border issues may have increased tensions among investors too. Any more rise in tensions may contribute to fall of market.
What Bulls have in their mind ?
Vaccine trials started on humans
A number of vaccine trials have started around the globes in many countries like USA, UK, India. Bulls believe soon there will be a full proof vaccine which will immunize human against deadly COVID-19. Well, possibility cannot be denied, but it seems a lot of damage has already been done. Even if vaccine comes, providing the same to billions of people will take months of time.
Market has already factored in bad news
Bulls in the market believe impact of COVID-19 is already factored in by market and it is not reacting to bad news anymore. While looking at the way market is behaving in recent weeks it may seem so but who know for how long this may continue. We can hope it is not a bull trap as investors may have entered the market considering fear of missing out the recent positive rally.
Lockdowns restrictions removed or eased
With Lock down restrictions uplifted in many countries and eased along in many others, businesses and industries have started pulling of their work.
Countries providing economic stimulas package
Countries have already provided billions of rupees as part of stimulus packages some handing over the cash directly in the hands of people while some indirectly.
If there is another crash coming be prepared not only for investing but for living through it. We will suggest you to:
1. Set aside some cash to invest if stock market crashes
2. Create an emergency fund
3. Reduce non-essential expenses
While we have put forward some points from both bulls and bears point of you, you are advised to do your own research and take decisions whether you want to enter in the market now or is it wise to wait for an another crash.