EDUCATION FROM BROKERS
Thu 9 Jul
Light at the end of the tunnel or approaching crisis?
An overview of the current market situation
The world is no longer on the
threshold of a pandemic. It has almost passed it. Despite the growing number of
new cases in the United States and several countries in South America, the
coronavirus is slowly but surely waning. Nevertheless, the coronavirus has been
raging on for
four months, delivering
a harsh blow on the global economy. Luckily, it is on its way to
recovery, yet the side effects of the virus or better to say consequences will
not allow the world's economy to get back on track in the nearest future.
During four months of the pandemic, entire sectors
of the economy have been experiencing a downturn. For instance, HoReCa (hotels,
restaurants, and cafes) have stayed closed in almost every part of the globe
for several months. Curiously enough, if a single link of the chain falls out,
the whole chain collapses in an instant. When HoReCa suspended its activity,
the service sector suppliers such as beer producers (kegs), the food industry,
and other similar enterprises faced serious difficulties. Hand tools
manufacturing, e.g. screwdrivers, has been put on hold all over the world due
to the shortage of components. The lack of even one component could lead to the
shutdown of a car plant for a particular market. In the globalization era,
markets are interdependent and a disruption in one of their sectors may trigger
an upheaval. Notably, this is what exactly happened when the coronavirus came.
All those factors had a negative impact on the stock market whose prospects worsened
significantly in 2020. Now investors are trying to guess what securities are
more resilient to market jitters or at least which ones are likely to return to
the levels set in winter.
Currently, when the
peak of the crisis has passed, it is almost impossible to predict the future of
the world stock market. Besides, analysts have not even calculated the
intermediate consequences yet. Without this data, economists are unable to
foresee the moment when the global economy will breathe with relief after its
prolonged illness. Despite some bold statements of a number of experts saying
that the era of globalization has gone and the era of regional protectionism
will begin soon, many experts think that these are rather romantic assumptions
than real facts. Apparently, after the pandemic, the strong will consume the
weak. Now the difference between those who survived the corona crisis without
symptoms and those who are still dealing with the consequences is enormous.
What is more, the financial rehabilitation in the post-crisis period will take
up at least one and a half or two years. It is more than enough time for more
resilient companies to absorb the weak ones. This is exactly how globalization
Therefore, the global
corporate sector has literally turned a minefield for investors for the time
being. For this reason, many experts point out that presently the currency
market is like a safe-haven territory for private investment. Besides, traders
can earn money there when the rest of the world is dealing with liquidity. The
currency market is immune to global perturbations. No matter what is happening
in the world, speculators can make a profit either on ups and downs in the Forex
market. Moreover, if there is some grain of truth in the statement
that the era of globalization is over, then we will see the heyday of
emerging-market and second-tier currencies.
already recorded a noticeable flow of private investment capital from the stock
market to the currency market. Now we can clearly say why. Apart from the
advantages mentioned above, the currency market is much easier to comprehend.
It is less vulnerable to speculation of the main asset holders (with corporate
securities, anyone can do whatever they want with more than 5% of the total
issue). In fact, Forex is a certain constant. Moreover, this market is immune to any market turmoil, as it
got vaccinated at its very establishment at the Bretton Woods Conference.
The material was prepared by InstaForex Group
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