Money Morning – Why Does Global Health Effect the Stock Market
All world events affect the stock market in dramatic ways. While the market is always a little unstable, you'll often see either rushes to buy or sell as the market swells or tanks. While some people are incredibly worried, others see these times as opportunities to profit. With coronavirus looming and many people scared, the stock market has been steadily going down. This will talk about how the market has been affected and why.
Coronavirus's Effect on the Market
Many people are hearing about the market being affected by the viral outbreak. The truth is that the market is changing dramatically each day with some days losing lots of value and other days stabilizing. It also depends on which sector you're looking at. Some are being hit harder than others, but it's undeniable that this virus is affecting every sector to some degree.
Some people are calling this just a downturn while others are calling it a potential recession. No one knows the full effect just yet, but what you should know is that this is an opportunity for investors. Buying established stocks when the market is down just means you're getting high-value stocks for a discount. These are the best dividend stocks to buy because you can get much more than usual.
Why Coronavirus Affects the Market
People are getting sick, what does that have to do with finances? Quite a bit actually. First you have human nature. When people are worried and see the market moving downward they start to sell their positions to turn their stocks into liquid. The thought is that this protects their money since it won't be affected by the downturn. The problem is that the money won't grow once the market recovers.
The virus is also deeply affecting businesses. While people are rushing to buy essentials like food and medicine, they aren't buying much else. This is affecting revenue levels across the entire spectrum of business. Not only that, but many businesses are having to reduce the number of customers they can serve to limit human contact. If a business isn't making the same amount of revenue, then their value drops on the market. There are many other factors as well, but this is the easiest way to explain why the virus is hitting the market like it is.
How Long Does the Effect Last?
As with all financial problems, this depends largely on how well people, businesses and government act during these hard times. If people get scared and sell all their stocks and refuse to get the economy moving, then it will last a long time. In the best-case scenario, people will stay calm, businesses will buckle down and make necessary arrangements and the government will use its money appropriately to keep the economy smooth.
If everything goes well, then the effect won't be for too long. There have already been days where the market has been stable and people are working towards slowing the infection.
There is a chance that things could last longer. Some people are calling for a global recession and saying that the market will crash. It's easy to give in to fear, but staying the course and remaining calm is the best way to counter these turbulent times. If everyone can keep a cool head, then the virus won't hurt the market for too long.
Coronavirus is the newest problem the world is facing and it has deeply affected the stock market. While this is true, the market can stabilize as long as people remain calm and don't do anything rash.