Coronavirus 2nd Wave Means 2nd Market Crash

Published / Last Updated on 26/10/2020

Back in January 2020 we issued a video exploring the impact on the SARS virus of 2002/2003 and explored how coronavirus might impact on markets if it spread.  That was a 30% market crash in 2002 and then a bounce back and then a second market correction in Spring 2003 before markets recovered.

We speculated that if coronavirus spread around the globe then it could mean a market crash and indeed it did happen in March 2020 and then bounced back in Spring 2020.  With the second coronavirus wave now firmly upon us, markets may likely fall again but by how much?

Looking at this years market lows compared to where we are now:  As at 23/10/20

  • FTSE 100 - Year Low 4,898, now up 19.64% at close 5,860
  • Dow Jones - Year Low 18,213, now up 55.58% at close 28,335
  • Dax - Year Low 8,258, now up 53.12% at close 12,645
  • CAC - Year Low 3,652, now up 34.42% at close 4,909
  • Shanghai - Year Low 2,646, now up 23.89% at close 3,278
  • Hang Seng - Year Low 21,139, now up 17.88% at close 24,918
  • Nikkei 225 - Year Low 16,358, now up 43.76% at close 23,516

We suggest it is perfectly feasible that the second wave will have similar market effects.  At close on Friday and opening this morning, the main stock market indices that we track are on average 35.47% higher than the March lows.  It is logical that a bigger second wave could have similar if not greater market impact if globally, we face a full lockdown again.  This means there is real potential for 30%+ falls again.

If you are cash parked or have considerable funds held in cash for ‘opportunity’ investing you may choose to invest soon or hold and wait.  Nobody can call the market or indeed the risk of virus spread and further market falls, so either way we are all gambling.  We have made our decision to invest fully in equities 7 months ago when most markets fell to year lows and have since bounced up and even if they fall again, we will still have bought in at a good price but you must make your own decision, we cannot make this for you.

If you are already invested and have suffered losses but recovered a little and now falling back again, know that markets will likely recover as soon as a vaccine is delivered.  Quantitative easing could also push markets higher, so you may choose to ride it out and wait for a vaccine and market stimulus.  Remember, you have only physically made a loss if you actually cash in or switch out of markets into safe havens.

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