Thanks to the coronavirus crisis, the world’s stock markets have endured a challenging 2020 to date, with even trail blazing indexes in the US having suffered huge losses towards the end of Q1.
The Dow Jones Industrial Average experienced record point drops on March 12th and the 16th respectively, while the respected S&P 500 index also declined by a staggering 11.1% during the same period.
Of course, these markets and global stocks have tentatively rebounded since this time, but what should we expect in the near-term and is it wise to be optimistic about the longer-term outlook?
Then and Now – How is the Market Faring?
There’s no doubt that the coronavirus pandemic sent shockwaves throughout the global marketplace, with the FTSE 100 in the UK also recording its biggest quarterly decline for more than three decades during March.
More specifically, the leading index of UK company shares plunged by an incredible 25% during Q1, representing the single largest quarterly contraction since the aftermath of Black Monday in October 1987.
The extent of this decline also caused most investors and economists to adopt a more pessimistic outlook at the beginning of Q2, with just over half (51%) of global CEOs expecting the Dow to fall back below the 19,000 mark before it mounts a sustained recovery.
However, it’s telling that there are also a growing number of stock market bulls in North America and the UK, with around one-third of respondents to the same survey expecting the stock market to reach a new record level without experiencing a further dip.
This highlights the level of uncertainty that still exists in the market, while it also reflects the volatility that has gripped shared prices during the first half of 2020. In this respect, there’s no doubt that the coronavirus pandemic has exacerbated existing issues such as the geopolitical conflict between China and the US, and this trend is likely to continue in the near-term at least.
What Should we Expect in the Longer-term?
If we look at the most recent performance, global equities benchmarks have begun to regain some form of composure and stability this week, with most indices having worked hard to retrace the losses recorded throughout March.
According to analyst Patrick Munnelly from Tickmill, risk sentiment has definitely begun to rebound firmly in the US, with the announcement of a fresh stimulus package for the economy in the wake of Covid-19 providing significant relief both for American indices and the US dollar.
It’s thought that this deal could be worth in excess of $1 trillion, while it will make allowances for much needed infrastructure spending and improved job creation.
Additionally, the recently released Non-Farm Payroll data in the states delivered a pleasant surprise to economists, who had predicted that the US would have shelved 7.5 million jobs in May thanks to the coronavirus.
However, US employers actually added 2.5 million payrolls during May, while the national rate of unemployment also plunged unexpectedly to 13.3% for the same reporting period.
Clearly, the number of Covid-19 cases still active in the US and global concerns of a second pike remain clouds on the horizon, as does the uncertain nature of America’s trading relationship with China. However, global stocks do at least appear to be rebounding in Q2, and at a significantly faster rate than expected.