With all this information regarding foreign markets already laid out, it’s time to put it into practice by beginning our trading journey! However, you may be asking yourself if now is even a good time to be making investments. Given everything that is happening, it may seem risky to be putting our money into unstable markets. The ongoing pandemic has turned out to not only be a health crisis but an economic one as well. Markets have been crashing and countries are struggling to keep their GDPs afloat. In this article, we will be looking into how markets are doing around the world, and how to invest in a truly uncertain time such as this.
Philippine Markets
A recent InvestaDaily article about Investing in the time of COVID-19 touched on how industries in the Philippines are doing given the ongoing pandemic.
The stock market plunged by 6.8%, and industries such as tourism, entertainment, and automotive have not been spared by huge losses. According to the British bank HSBC, our GDP contracted by 0.2% in the first quarter of 2020, and they predict a 7% contraction in the second quarter, 4.3% in the third, and 3.9% in the fourth, bringing the full-year contraction rate to 3.85%. The entertainment industry will see a revenue loss of 82.3%, while the travel industry will see an 81.9% loss. Our unemployment rate is at an all-time high of 17.7%, with 4.9 million Filipinos unemployed. These drastic numbers were brought about by the harsh ECQ, putting many individuals out of business.
Additionally, the drastic quarantine measures instilled a high level of fear in many Filipinos, reflecting in our consumer spending habits. Even as we are easing out of ECQ, the fear instilled during those 3 months stops many from buying goods, leading to a drop in consumer demand, and ultimately, large layoffs and companies shuttering. Though these facts may be concerning, there is still space for investments and opportunities if one looks in the right place. With many still stuck in their homes and practicing social distancing, technology has been brought to the forefront of this “new normal” we are seeing. A huge shift in online means of conducting business and communicating will bring huge opportunities in the technology industry. Technology will be leading our future, and there is no better time to invest in it than the present.
International Markets
IMF’s Managing Director Kirstalina Georgieva said that, “Global growth will turn sharply negative in 2020” due to COVID-19, and she was not wrong. Mercatus predicts that the US GDP will contract by 10% due to the first two months of the COVID-19 lockdowns, and the World Trade Organization expects global trade to fall by 13% – 32% this year.
Adding on to that, the United Nations expects global GDP to fall by 1% this year, all due to the pandemic we are currently facing. However, as many countries are slowly starting to recover from the pandemic and opening up their economies, there is a glimpse of a silver lining. US markets were looking stronger in April and May following widespread disarray and panic in March, and in June, the S&P 500 turned positive. Despite this, the US is still cautious, and as several states are reopening their economies, fears of a second wave of infections are reflecting in the stock market. These fears of a second wave are solidified by an increase in cases being reported in China, sparking fears of a lockdown in the business hub of Beijing, and infection rates are beginning to spike once again in the US.
Truly, the only thing that will stabilize markets for the long-run is a vaccine for COVID-19, which does not seem to be near in sight. However, if a second wave does happen, the world is better prepared for it – given that we have already gone through a first wave, many professionals are aware of the best practices, and will better contain the virus. Though futures indicate that the Dow Jones will fall by 500 points and the S&P has already fallen by 1.8% this week, there is hope that once the fear of a second wave calms down, markets will return to somewhat normal numbers.
Is it safe to invest?
Though the world is in a state of uncertainty right now, it would not be a good idea to halt your trading journey at once. There is no end in sight for this pandemic, and so, though it is not the most ideal place to be trading, it should not stop one from doing so as well. Taking Warren Buffet’s advice, who has survived many recessions, it is a good time to find undervalued businesses at good prices. With technology seeming to lead our future, it is a good time to seek out stocks in the tech industry, especially ones that have high potential yet have not reflected in its stock prices. Especially important is the philosophy of buying stocks over time. Especially now that prices are lower, it is a good rule of thumb to keep buying stocks at low prices and wait a longer period of time for those stocks to increase in price. Additionally, one should not wait for the prices to bottom out, as this is near-impossible to predict. Keep buying stocks until the trend turns upward, and wait for the price to go up enough to make up for any losses.
Though now may not be the most ideal time to begin, there isn’t a bad situation where you cannot find any good. At such a critical time, it is important to do your research, carefully analyze the market, and avoid making rash decisions. As Buffet once said, “Be fearful when others are greedy and greedy when others are fearful” – though this should not be taken to the extreme, it serves as a reminder to see the upside to any negative situation, and turn seemingly negative situations into positive ones.
This article is a continuation of the Going Global series. If you haven’t read the global articles, check it out here:
Going Global: How do I Start Trading Internationally?
Going Global: A Deeper Look at the US Markets
Cryptocurrency: The Money of Our Future?
The Going Global series aims to introduce traders, whether beginners or advanced, to the international stock markets. Throughout this series, we will explore the pros and cons of international investing, how to kickstart your international portfolio, and many more tips to navigate this more complex trading world.