At the start of February 2020, investors were confident that the outbreak would ease, buoyed by figures suggesting that cases were leveling off. However, as the number of infections continued to increase, initial optimism began to subside. The World Health Organization declared COVID-19 a pandemic, setting financial markets up for significant losses. Fearing that the virus will destroy economic growth, traders are opting to sell their shares, and investors have been deterred from buying stocks.
In Asia, where the outbreak was first reported at the end of December 2019, concern about the spread of the disease has led to the current downward market trend. The values of the Shanghai Stock Exchange Composite index and the Nikkei Stock Average index have plunged in the wake of the pandemic. Japan’s economy was dealt a further blow with the news that the Tokyo 2020 Olympic Games will be postponed by up to a year.
COVID-19 has struck fear into the heart of the economy in the United States. The Dow Jones Industrial Average index has reported some of the biggest single-day gains and losses of its history, reflecting the highly volatile nature of the financial markets. The S&P 500 index and the Nasdaq Composite index have also battled to stay afloat in such rough waters. These unprecedented times have led to the U.S. Senate passing a two trillion U.S. dollar coronavirus aid bill to support the American economy.
In Europe, the Financial Times Stock Exchange 100 index suffered its steepest one-day fall since 1987, and stock exchange indexes in Latin America also dropped dramatically as the coronavirus started to spread across the region.
This is no ordinary downturn in the financial markets; the repercussions of the coronavirus are expected to be felt for many more months, possibly years. Relief plans, such as the one introduced in the United States, have started to lift financial markets around the world, but investors remain cautious and look set to wait for the outbreak to be controlled before once again investing in stocks.