InvestNow News – 27th Mar – AMP Capital – Impact of Covid-19 on domestic share market

23rd March 2020 – Daniel Mead Investment Research Manager – Wellington

The implications of a global pandemic are far reaching. What started as a virus outbreak and tragic loss of life quickly morphed into a Chinese supply shock, then rapidly became a global demand shock sharply impacting consumer spending habits. The flow on effect is now hitting businesses as they adjust to the ever fluid environment, and delay or postpone investment while looking to firm-up balance sheets. Actions taken by governments around the world aiming to slow the spread of the virus have led to an immediate decline in economic activity, and while emergency budgetary and monetary measures do little to offset the immediate decline, the actions will provide a springboard to growth once the pandemic is over.

Financial markets have suffered as a result, with investors weighing up the costs to businesses. Rapidly deteriorating investor sentiment and a high degree of uncertainty has seen volatility spike and share markets plunge into bear1 territory. From the recent peak (only four weeks ago) to Friday 20th March the S&P 500 Index is down 32%, while the S&P/NZX 50 Index has declined 24%. This was the quickest descent into a bear market in history.

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