Will The Stock Market Bounce Back? What to do next – buy, sell, or hold?
The pandemic has had its toll on the economy as much as it has changed the health of people. In less than four months, stock markets around the world have felt and experienced severe crashes. The question on the lips and minds of everyone is with the 2020 stock market crash where is the economy heading to?
Hello and welcome to my blog, where I pass on all of my financial knowledge and experience. This time around, I will be giving my advice on what next to expect with the present economic situation.
Will the market recover? Will businesses recover? Will things go right back to where they were six months ago? These are questions that I will be covering and hopefully be able to give my advice on what next we can expect and possibly the lowest and highest results that could happen. First, I will be discussing the effect of the pandemic.
The effect of the pandemic
The pandemic has certainly upturned the world from its regular pattern. This upturn, unfortunately, cannot be changed easily to its normal state. This means that even if the pandemic dies off right at this minute and the world is finally free to return to normal, nothing really will be normal. Things won’t fall into place easily, and the financial and economic world will have to face this challenge for a long time to come.
Sadly the pandemic has eaten deep and shaken a lot of businesses, companies and organizations, and we can be sure that several of these will not survive long enough to recover. Many companies will shut down, and we have to accept that now. Before the pandemic, a lot of companies and businesses were already running on shaky grounds. And now as Warren Buffet said, a lot of businesses that were swimming naked will be exposed as the tides go out. The tides are out courtesy the pandemic and many businesses that were barely surviving might not be able to make it back to the economy.
To really get the picture of things, the S&P 500 have over 40% of their companies that were already barely running, and the chances are higher that they might just end up declaring bankruptcy. Neiman Marcus is an excellent example of a high-end, reputable company that has already declared bankruptcy due to the pandemic and the crash in the economy.
The solutions that have been presented
An effect of the economic crash will be an increased unemployment rate. As companies are cutting down costs or even going bankrupt, more and more workers will lose their place. As we watch sadly as more companies like Neiman Marcus go bankrupt, they will be faced by the bankruptcy court. The court works in a system that is mainly directed to saving the employment status of workers in the company. Their strategy or solution will explore the possibility of the company staying in business. If they conclude that the company has the potential to make money, but they need less debt to get there, then they will initiate a process of refinancing the company.
The step rather than liquidating the assets, will shift the stakeholders to equity status and take out present equity holders. Then they open the company’s stocks to be sold off to more lenders and generally begin refinancing.
The recovery from the pandemic
The recovery stage, as I said, will take a long time. The solutions that are being offered will keep on going until we get past this stage of recession. Clearly, the world is already in recession, and if things don’t recover fast, then we will enter the depression state. Now the state of depression is at a really horrible point, like ten times what is being faced now. Some of the indicators that an economy is on its way or already in depression are
Gross domestic product GDP is simply the value of goods and services produced within the country. When a country is sinking into depression, the value drops, and sadly that’s what’s going on now across the world. The value of products are dropping now, and that is a good indication that the world might see a terrible depression. Depression will be official when the GDP growth is at a negative.
These two will go together. Once the world economy becomes stagnant, not progressing or regressing, then depression is inevitable. Although governments around the world are trying to keep the economy going, I can see that these two points are slowly creeping into the economy.
With inflation, the market value skyrockets. And I believe that’s slightly what’s happening to the stock market now. In my post ‘the benefit of the economic crisis’ I said that at this stage it isn’t wise to sell and I still hold onto that, but I also say now to look around at the big players in the economic and financial world and note what they are doing. No one can truly predict what will go on, but you can have a strong gut feeling, and my gut is saying that if Warren Buffet can stop buying and say that there are no worthy sales available, then that’s a reason to wonder if the stock market is facing inflation.
Companies always tumble at one point or the other, but a strong indication of depression is when several notable companies begin to suffer greatly. Two things could happen here, either the trouble in these companies are caused by investors pulling out or the troubles already going on with the companies will make investors pull out. Whichever the case, the stock market will face a lot of issues because those who are largely invested are those who are in the retirement or near the retirement stage.
These all points to the fact that the market will face a lot of challenges from now. This situation could either be a blessing in disguise or a step to really bad times. As I said, no one knows, but in my opinion, it is your decision to make and anything can happen, and I mean anything. What is your take, will you be buying, selling or holding at this low point in the stock market? Leave your comment, and I will like to know your opinion. If you liked this post and would like to see more of it, like and subscribe and do not hesitate to share it to those who you think might need the advice.
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