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 works.
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.
Brokers have 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
