A year after the pandemic broke out - April 30, 2021
Clearly, the economies have been severely impacted. However, the decrease in GDP of many economies was not as serious as forecasted by the International Monetary Fund (IMF) in April 2020, just after the pandemic broke out, and a half year later in October 2020. Some numbers are as follows:
Global GDP is lower than expected in April 2020, mainly due to a significant decrease in India's economy. However, advanced economies and emerging and developing European economies outperformed the expected results. The IMF's outlook for 2021 in terms of global GDP has been also upgraded:
The stock market took a big hit with the outbreak of the pandemic. The S&P 500 lost ⅓ of its value during just a month: it closed at 2237 on 23 March, which is 34% below the pre-pandemic high. 99% of the S&P 500 stocks lost their value within that period. Close to 20% of the firms in the index lost more than 50% of their value.
However, the US stock market as a whole swiftly recovered after the March 2020 crash induced by the pandemic. S&P 500 is breaking record after record. The index increased by 24% from the pre-COVID high (19 February 2020) and is 87% higher than the 23 March 2020 recent low. However, some industries, such as the energy sector, have yet to recover from the outbreak of the pandemic.
The governments and the central banks employ a number of tools to support the economies. in the United States, the Federal Reserve is still projecting near-zero interest rates until at least 2023. In addition, the Fed will continue the asset purchases amounting to at least $120 billion per month until substantial further progress has been made toward the employment and price stability goals. The Federal Reserve has improved its outlook for economic growth and unemployment. Upgraded US economic outlook, the zero interest rate policy, and liquidity provided by the Fed asset purchases support the stock market valuations and inspire optimism about stock performance in the near future.
The bottom line
The impact of the pandemic on economies has been tremendous. However, the impact is not as serious as predicted at the start of the crisis. The economic outlook is also better than expected just after the pandemic broke out. The COVID crisis has clearly demonstrated that diversification and discipline helped investors avoid losses and achieve profit even in this challenging time.
Disclaimer: This analysis is for general information and is not a recommendation to sell or buy any instrument. Since every investment holds some risk, our main business policy is based on diversification to minimize threats and maximize profits. Innovative Securities’ Profit Max has a diversified portfolio, which contains liquid instruments. This way, our clients can maintain liquidity, while achieving their personal investment goals on the long term.