How Coronavirus has brought the stock market to its knees

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Written by Aryan Agarwal

May 6, 2020

Thinking about the stock market right now may be the least of your worries as the coronavirus spreads at such a fast rate.

Finding ways to invest your money and get your maximum possible return may also be at the bottom of your mind but, this might be the best time to invest your money.

The stock market has fallen to a rock bottom price where it had been a couple of years back on 24th March 2020. Although it has increased by about 25% from that price, you need to understand why it happened and if it could happen again.

The Reason

Nobody could have predicted that the virus that started in china a couple of months ago would wreak such havoc on the world.

Coronavirus may be the biggest reason for the stock market, but this is only one of the factors for the crash. Coronavirus has only accelerated what was already coming our way and maybe has even intensified it.

Everyone has been affected by coronavirus, and everybody is scared of it as well as they should be.

The stock market is reacting like a roller coaster right now with ups and downs each day. Coronavirus has understandably spooked a lot of investors in the stock market due to the uncertainty of the disease and the more important lockdown because of coronavirus.

As we all know that investors don’t like uncertainty, and thus the stock market is behaving this way.

We have even seen negative(-) 13% decline in a single day and a positive(+) 15% gain on the same day in the stock market on 24th March 2020 as there was a circuit breaker in early trading hours and then after trading resumed, the stock market gained 15% to end up at a 2% gain for the day.

Imagine the emotions of the person invested in the market and what people go through in times like these.

Earnings of all companies are affected by this, while very few companies like the pharma industry and the tech industry have benefited by it. All the other companies have either had their sales reduced by more than 50% or have become no existent.

This has caused most of the companies to think about bankruptcy as the management didn’t plan for a situation this bad.

Recently automobile manufactures sales numbers were published for the month of March, and the numbers were abysmal as most of them didn’t even sell a single car. It’s evident that the management didn’t think that their sales will be absolutely zero.

I expect the stock market to go even crazier when Q1, Q2 results of the companies are announced as these earnings will have the worst effect on the virus, and I think that Q3 will also below the purchasing power of the people be less compared to before.

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What to do to protect your investments?

Try to analyze a company based on its fundamentals.

Check the DEBT of that company and see if it can sustain its cash reserve for 2-3 months more without any problem. DEBT is the biggest problem a company will have right now as they will not be able to pay it.

After DEBT, you need to check their management and how they are handling their companies in a crisis. If you like the management and their work and their financials are healthy, you can invest in that company in this downturn.

You might see that some companies have fallen a great deal from their 52W high and are now at multi-year lows. Before putting money in these shares, you need to check and find out why are people pricing it at such a low price?

After finding out the reason, you need to think if that reason is valid and do you think the company will have a problem because of it in the long term.

You should focus on long term investing as you earn compound interest on your investment.

I will post an article this week about what to look about in a company’s balance sheet and its fundamentals.

I hope this helped you with your investments.

Check out how to avoid losing money in the stock market.

Let me know if you check the fundamentals of the company before investing.

Stay Safe Guys!!

Investments during coronavirus

Have money for emergencies kept aside and invest the money in the stock market as this may be the best time to invest for a while.

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