Global crises like the one we are currently enduring are uncommon, and the unprecedented nature of such widespread events can wreak havoc on the financial markets. Historically, the financial markets around the world have suffered their fair share of recession, but in difficult times like these, the future of the global markets is remarkably uncertain.
As 2019 came to an end, many investors and financial professionals had high hopes for 2020 with faith that the bull market (which had lasted around 11 years already) would continue. With the arrival and impact of COVID-19 on the world, the markets have instead become subject to increased volatility due to fear and uncertainty. For some investors, volatility can be discouraging, especially in times like these.
Investors know that there are risks inherent with any investment, but the uncertain nature of the pandemic (including how long it will last and what its overall impact will be) has led to a heightened awareness of the potential for loss in the markets. While some industries (like those involved in the production and distribution of medical supplies) have actually benefited from an increased demand, other industries (like hospitality, travel, and entertainment) have experienced reduced returns.
Some industries have experienced hardships due to supply chain disturbances and production delays; companies like Nike, whose production occurs primarily in China, are at a higher risk of decreased interest and lower revenue not just because of the potential for delays but because of widespread fear.
For investors, these times should not serve to discourage efforts to obtain a good ROI. Instead, it calls for adaptation and innovation. The markets are still moving, and though high volatility can certainly be scary, investors can adopt strategies that thrive on volatility. Avoiding the influence of panic or desperation will be key.
As for the future of the financial markets, it is almost guaranteed that the global economy will suffer from this pandemic. However, that does not mean there is not hope of recovery. Even with high volatility in the markets today, there are still opportunities to increase income, protect against downside risk, and weather the storm.