Coronavirus is a deadly disease that’s spreading around the world. Sadly, it’s not just a health challenge but could also cause a major economic crisis. The stock market is seriously struggling since the outbreak of COVID-19, and now that the virus has affected Japan, Italy, Iran, South Korean, and the United States, there’s pressure on businesses and supply chains around the world. This singular act has inspired fears in investors, which is causing upheaval in the stock market.
Ordinarily, the stock market doesn’t like uncertainty. This is because uncertainty makes it difficult for businesses to plan and make predictions.
So, the spread of the epidemic that’s arguably the greatest threat to humanity in recent times fueled serious panic. And investors have been withdrawing their money from the market by selling their stocks. Towards the ending of February, 5 trillion dollars was withdrawn from the global financial market.
Furthermore, the Dow Jones Industrial Average had its single biggest one day drop in history, falling 1,191 points on Thursday, February 27th, 2020. The Dow Jones Industrial Average is an index of the top 30 major blue-chip stocks. Experts use Dow as an indicator of the stock market.
What surprised investors most about the drop is that the Dow hit a high record two weeks earlier.
According to Greg McBride, the chief financial analyst at Bankrate.com, “As coronavirus fear gripped the markets, the stock market experienced its worst week since the financial crisis. However, the market is still higher than it was last August”.
Which Stocks Are More Vulnerable To Plummet?
Sorry to disappoint you, all stocks are being affected. However, oil stock prices plummeted because of travel restrictions in some countries, the closedown of factories across China, and the halt on manufacturing and deliveries. This has seriously affected the oil and gas industry; thus, the reason oil stock prices plummeted.
According to Claudio Galimberti, head of demand, refining, and agriculture analytics at S&P Global Platts, “February will record the worst oil demand contraction since the Great Recession.” He also said that “Aviation will be seriously affected in Asia, and it will take several months to balance.”
For instance, US companies like Twitter, CNN, and Amazon are cutting employees’ travel to reduce the possibility of the disease’s spread. And these policies will affect the aviation industry.
What is in Store for the Stock Market if Coronavirus Continues To Spread?
The coronavirus continues to spread and affect more countries around the world; there will be a global recession. Some countries will temporarily shut down airports, malls, and factories. And when this happens, investors will withdraw their money from the stock market, and the market will crash.