Coronavirus Pandemic and The Global Economy
The coronavirus pandemic has adversely affected the global economy resulting in a recession. The finance and investment industry is the worst-hit sector characterized by investor flight and plummeting of the capital markets. To make matters worse, the end of this pandemic is presently unknown, with the rise of new infections around the globe every single day. This tragedy has resulted in the closedown of businesses in most global regions due to the governmental closedown directives aimed at containing the virus. As a result, most sectors experience declining revenue leading to losses and the decline of the company’s equity. Economists cite that if the present situation prevails until the year’s end, the global economy’s implicationswill be fatal (Otani et al.) At the same time, investors are sitting on the fence in observing future events’ turnout and their impact on the financial market. Hence, this pandemic has transformed investment decisions in portfolio management due to the rapid erosion of the financial market resulting from investors’ struggle to salvage their wealth by liquefying their investments.
Given the high systematic risk associated with this sector, the worst-hit market is the finance and investment industry. Ideally, the S&P 500 stock was considered suitable for investments, given it maximized investors’ wealth at minimum risk. However, the stock posted a 20% loss in the first quarter of the year, escalating its riskiness for investment (Otani et al.). Notably, this loss was the most significant experienced by the stock since the 2007/8 financial crisis. On the other hand, some investors speculate this would be the best time to purchase this stock due to its decreased value, given that in the event of economic recovery, the stock would regain its original value over a few fiscal quarters. Afterward, the investors would trade the investments at a profit. But then, the main question is when will the stock market hit bottom before it can rise to glory. At the same time, it would be unwise for investments to sell off this stock at the period since they would not recover the original stakes, yet this has been the trend since the coronavirus transformed into a global pandemic.
Notably, the Dow Jones stock also reported a 23% loss in the first quarter, featuring the stock’s lowest performance since 1987. The underperformance of the stock is attributed to the negative implication of the virus on business operations (Otani et al.). In an attempt to control its spread, lockdowns have been implemented, inhibiting all forms of transport, i.e., water, air, and land. Consequently, sales revenue earned by energy companies in powering transport vessels reduced significantly, hence adversely affecting the stock’s value. For instance, Exxon Mobile and Chevron registered 46% and 40% losses, respectively. The pandemic has severely affected other industries, such as tourism. It is important to note; the coronavirus pandemic has also adversely affected other investment options, for example, treasury bills and hedge funds. Notably, hedging funds enhanced the use of computer-driven models in predicting the future outcome of the investments. This approach substituted the use of information in the financial market to predict investment performance. Presently, all financial investments in the capital market are unfavorable as a result of the economic decline. Nonetheless, some investors see this as the best opportunity to invest in maximizing returns from investments.
In conclusion, the current global pandemic has transformed investment decisions in portfolio management due to the rapid erosion of the financial market resulting from investors’ struggle to salvage their wealth through liquefying their investments. On the other hand, some investors speculate this is the best opportunity to invest in stock to maximize their wealth.
Otani Akane, Isaac Anna and Chiu Joanne. Stocks Suffer Worst Quarter Since 2008. Wall Street Journal. 2020. https://www.wsj.com/articles/global-stock-markets-dow-update-11585617395
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Throughout the semester, students will participate in current event discussions. Each group will be responsible for a current event from the Wall Street Journal ONLY.
The only requirement is that the group must select a topic that is focused on capital markets and investments that may lead to a portfolio management decision. This should be an easy task with the Wall Street Journal since there is multiple capital markets stories almost every day. The topic must be substantial and must have enough information to present your topic. The paper should be no longer than 2 pages + a cover sheet.
- I have provided the article already “Stocks suffer worst quarter since 2008”
Stocks Suffer Worst Quarter Since 2008
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