Due to COVID-19, stock markets across the world are experiencing worse times than during the financial crisis in 2007-2008. Why aren't we closing the stock markets?
Despite governmental interventions, the markets continue to plunge. The U.S. Federal Reserve unleashed extraordinary action aimed at shoring up market confidence this morning. However, investors took that as an impetus for more panic. In Europe, markets opened today more than 4 per cent lower, then fell more than 8 per cent as the morning continued. France’s main stock index briefly fell 10 per cent. Futures trading on Wall Street pointed to a sharp losses at the start of trading. The Asian markets are also in brutal turbulence. Australia suffered a 9.7 per cent plunge in the S&P/ASX 200 stock index, leaving it down about 30 per cent from its high last month. And we still do not know what is going to happen during the next week or a month!
More and more governments are closing schools, universities, public institutions and some even their boarders! In the light of the increased mortality, governments announce states of emergency and limit the free movement of their residents. Private companies are also taking major decisions, cutting the pays or letting their employees go, as they cannot foresee how long this state will last and what will be their final financial losses.
In the light of the global uncertainty, there have been several periods when the trading on stock market was halted. However, we have not yet discussed stopping the trading altogether for as long as we do not start seeing silver lining. It would have been an unprecedented decision, but so has been the spread of the COVID-19.
China is most presumably reaching its silver lining. If we look at the development there, it has suffered record drops in retail sales, manufacturing activity and investment in the first two months of the 2020. The same is expected in Europe and in North America. Yet, the promising containment of COVID-19 in China might show recovery.
It is undisputed by now that the virus will be the cause of our recession, but how deep the recession, depends on our steps. Governments and regional organisations have been promising tax releases, major liquidity injections, emergency interest cuts and many more. None if it is working. We need to start thinking outside of the box and hit the "pause" button, now!