The Coronavirus pandemic vs the Global Stock Markets

Coronavirus pandemic

There’s no doubt the coronavirus pandemic has been a massive shock for the whole globe.  Perhaps most surprising is the shock that has happened to global stock markets.

A century of ups and downs

For 100 or so years global markets have experienced quite a number of significant downturns as a result of major global and national events or catastrophes.

COVID-19 seems to be one of the most dramatic events stock markets have experienced mainly due to the speed at which the market indices have dropped.  By far the worst day ever on global markets was Black Monday, way back in October 1987. Here we saw stock markets plummet around 25% in a single day.  Ouch!

However, there was only one bad day and the whole episode was over within the month.

The bigger they are, the harder they fall?

The most prolonged period of negative growth ever experienced has to have been the Wall Street Crash in 1929.  It sent the Dow Jones Index on a downward spiral for nearly three years and left the market at around 10% of its former value.

Note: The index fell from a high of around 380 and bottomed out at just 41

To provide a more recent comparison, the GFC lasted around a year and saw most global markets cut in half.

Why is COVID-19 any different?

In contrast, COVID-19 has wiped at least 35 % of the market value of all major market indices such as Germany, France, the UK, Hong Kong, Japan, the US, and Australia.

The most striking thing about this decline is that it’s happened in less than a month.

That’s very quick!

But then no one really saw this coronavirus pandemic coming, did they…

These graphs below show how much more dramatic the decline has been on the All Ords when compared the GFC.

Note: You can interact with this and explore the impacts of different major events on the different markets.

The next graph compares the impact of each on the different markets.

You can see how markets have been shaped by different events and in some cases, markets respond differently.  For example, during the GFC, all markets suffered about equally, whereas “9/11” and the European Sovereign Debt Crisis had varying impacts across the globe.

You’ll notice that COVID-19 has also had varying impacts on different markets with the range of losses between -18% and -37%.

The coronavirus pandemic creates some of the biggest losses

Most alarmingly and aside from Black Monday, COVID-19 is the cause of quite a few of the top ten biggest loss days across most of the markets.

Why it’s alarming is that it’s happened in such a short period of time and yet COVID-19 is seemingly just getting started in Europe and the Americas!

I want to get off!

They say the market price in expectations and it’s clear no one was expecting COVID-19.

The big question is when will the markets start to understand the true impact that COVID-19 will have on the globe as a whole?

Hold on tight, ‘cos I sense the ride’s not over yet!