When will the coronavirus stock crisis end?

When will the coronavirus stock crisis end?

The Motley Fool  | Aug 02, 2020 07:40

When will the coronavirus stock crisis end?

The coronavirus pandemic has obliterated financial markets around the world. Share prices are falling, dividends have been cut, and investors are confused about how best to approach investing. Every day the headlines are filled with business news of losses, sales declines, job cuts and missed targets. The pain is huge, and although some equities have bounced back from the market crash in March, many individual stocks are still suffering.

Financial markets are cyclical in nature. There have been, and always will be, times of boom and bust. But I strongly believe the coronavirus stock market crisis will end, yet when and how remains to be seen.

Is coronavirus solely to blame? While the current situation can largely be blamed on Covid-19, many analysts believe a market correction was long overdue.

The reason for the dividend cuts is really for businesses to manage their cash flows in the short term. The fact that many of them did not have sufficient emergency reserves shows why the bull market was becoming unsustainable. As the coronavirus stock crisis essentially came out of nowhere, businesses were ready to collapse if they did not rapidly resort to drastic measures such as slashing dividends and cutting jobs.

If a company releases bad or disappointing news, its share price will be pummelled. Shareholders are already running scared with the coronavirus pandemic still rampaging and no obvious end in sight. Rising national debt is raising fears of interest rate hikes, and the dividend cuts have income investors spooked.

When will the coronavirus stock crisis end? When a licensed vaccine finally emerges, I have no doubt it will work wonders at getting the stock market back on track. Whether that alone is enough to kick start a bull market is not yet clear.

A substantial lift in the oil price would also boost the financial markets, but that looks a long way off as demand for oil has hit an all-time low and production is still higher than needed. A working vaccine would help restore flights and factories to business-as-usual, in turn boosting demand for oil again.

I don’t think any of us can say for sure when the coronavirus stock crisis will end, but investing in quality stocks with strong business models will help your portfolio survive the downturn and emerge stronger.

Not all news is bad. Virgin Money (LON:VM) saw a dip in consumer lending in the second quarter but has not yet witnessed a spike in credit losses. If the furlough scheme ends well without further job losses, then there is hope that this pattern will continue.

As a long-term investor, it is important to see the big picture and remember than everything is cyclical. Hold on, don’t give in to fear or greed, but build a resilient portfolio of stocks that will see you through market stress. This period of uncertainty is a great time for you to buy stocks at knockdown prices from which you can reap the rewards when the business gets back on track. Look to where you think companies will be in a few years time. If you see a clear path ahead for a business, it is not laden in debt and is likely to stay in favour, then these could be signs of a good buy.

The post When will the coronavirus stock crisis end? appeared first on The Motley Fool UK.

Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2020

First published on The Motley Fool

Latest comments

Add a Comment
Please wait a minute before you try to comment again.
Discussion
Write a reply...
Please wait a minute before you try to comment again.

Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

English (USA) English (India) English (Canada) English (Australia) English (South Africa) English (Philippines) English (Nigeria) Deutsch Español (España) Español (México) Français Italiano Nederlands Português (Portugal) Polski Português (Brasil) Русский Türkçe ‏العربية‏ Ελληνικά Svenska Suomi עברית 日本語 한국어 简体中文 繁體中文 Bahasa Indonesia Bahasa Melayu ไทย Tiếng Việt हिंदी
Sign out
Are you sure you want to sign out?
NoYes
CancelYes
Saving Changes

+

Download the Investing.com App

Get free real time quotes, charts and alerts on stocks, indices, currencies, commodities and bonds. Get free top of the line technical analysis/predictors.

Investing.com is better on the App!

More content, faster quotes and charts, and a smoother experience is available only on the App.

';