COVID-19 or the novel coronavirus has had a uniquely damaging impact on the world economy. Since its beginnings in December 2019 in Wuhan, China, the virus has spread rapidly and caused the deaths of thousands of people.
The coronavirus has already had a chilling effect on global travel, tourism, and trade. Market Traders Institute explains some of the financial issues surrounding the coronavirus and offers suggestions to help investors succeed in these challenging times.
The Federal Interest Rate Cut
In an effort to reassure a skittish market, the Federal Reserve Bank recently instituted a 0.5% rate cut, followed soon after by an emergency rate slash to zero. These rate cuts are meant to prop up the GDP and give consumers a better footing on which to borrow money or make large purchases.
While most people are not thinking about buying homes at this time, the rate cut has been beneficial for new mortgage applicants as well as refinancing consumers.
Impact of the Federal Rate Cut
The Fed’s rate cuts could have a heartening effect on the economy. When the rates are cut, companies will be more likely to invest in their communities and to make large purchases. The Fed’s rate cuts have also encouraged other countries like Great Britain to follow suit.
Investing in Foreign Currency
This may also be an excellent time to consider investing in foreign currency. Forex trading is alive and well even during the coronavirus, and some currencies are providing a solid basis for a portfolio. The dollar remains strong, though the yen and the Australian dollar are falling off somewhat. When these currencies fall in price, it is a good time to buy them.
Although new or inexperienced investors may be nervous about investing in foreign currencies in this market, the unique nature of the forex market means that, because traders can buy or sell from either side of a currency pair, there are always money-making opportunities to be found.
If the stock markets continue their downward turn, there may be more interest in trading foreign currency. Traders should keep an eye on important ratios and currency levels in order to make the best possible decisions.
Lasting Impact of the Coronavirus
The coronavirus will continue to have an effect on the global economy well into the future. Wages and production have fallen off in many industries. The prohibition of large gatherings as a preventative measure has meant that many large festivals have been canceled. Even sporting institutions like March Madness and the Boston Marathon fell victim to the coronavirus’s widespread impact.
Economic factors are also determining who can stay at home when they are sick. More retail and restaurant companies are beginning to offer paid sick leave to their hourly employees who normally would not have this benefit. Without these basic health and safety precautions in place, it is possible that the virus will spread unchecked.
While the health effects of the coronavirus should be taken seriously, prospective investors have the opportunity to buy stocks and currencies while they are at a low price. Today’s market is not a panic sell-off, it is a more measured opportunity. If enough investors take advantage of this change, the economy may be able to recover more easily.
Possible Solid Bets
Gold has been rallying, even though other currencies are depressed. Many investors rely on gold as a hedge against other, more volatile investments. As the price of gold has remained relatively stable or risen a small amount over the past several months, gold remains an important part of many investors’ portfolios.
Some analysts believe that Bitcoin and other cryptocurrencies may be a hedge against falling prices of other commodities. The jury is out on whether Bitcoin will do well in the aftermath of the coronavirus, but it is worth keeping an eye on the numbers and deciding whether this investment is right for you.
The Market Fundamentals Are Strong
Even though the coronavirus is having a major impact on the world economy, it may be too soon to predict a recession based on this situation. With stimulus packages and rate cuts, the government is doing its best to make investment attractive to businesses and individuals alike.
Keep a Close Watch on the Markets
If the coronavirus is not contained within the next few months, there may be nothing that governments can do to raise consumer sentiment. It may create long-term financial consequences that are difficult to recover from. Investors should look into foreign currency, manufacturing, and high-tech stocks for growth opportunities.
Market Traders Institute reminds investors that they must always look at all the relevant data before making major decisions. Investment advisors can help people make better decisions with their money, even in a financially difficult time.