No investor can weather the impacts if COVID-19 without adjusting their financial outlook. If stocks are a majority of your holdings in 2020, then your main focus should be to avoid panicking. Seeing the financial markets reach a standstill can lead an investor to overreact. The onset of 2020’s coronavirus caused stocks to plummet in a way that led many to question how stocks would fare. Here are the impacts of a coronavirus on U.S. stocks:
At Least a Year of Recovery
Since the ‘60s, the impacts of market recessions on U.S. stocks have required 250 days of recovery on average. In the ‘70s, the U.S. economy’s collapse called for a recovery period that took over three years. The impacts of COVID-19, however, are still relatively unknown in 2020.
A Struggle for Immunity
Scientists are uncertain about how long our immunity to COVID-19 will take to build. Financial markets, due to social distancing, won’t recover if society can’t develop a vaccine to stop its high rates of death from respiratory failure. Our struggle to build immunity to a viral disease not only costs us money, but it’ll put people out of work.
False Hopes via Government Spending
Investors in 2020 were lured into the stock market due to false rallies in market prices. The U.S. government, in an attempt to save stock markets, bought equities in bulk, resulting in prices rising. The false rallies from the Fed’s infusion of cash into corporate stocks are misleading investors.
Underperforming Businesses—Extreme Layoffs
Unfortunately, economic data is made public through a financial schedule that’s delayed—due to national interest. The rising unemployment rates that we see today, for example, might be higher by up to three times. Public investors won’t see economic data until 30 days after U.S. officials have first received it.
The “Selling Frenzy” Likely to Come
Panic often leads investors to immaturely get rid of stocks. “Dumping”—what massive stock selling is called—leads investors to, out of fear, sell their shares in haste. Though the Fed steadied stock prices in April of 2020, people are likely to lose patience and start a frenzy of selling that could drop prices to historic lows.