Post COVID-19, the global stock market crashed. The Dow Jones industrial, which measures an average stock value between twenty transport stocks and serves as a proxy for the United States stock market, fell 6.4 percent in just one day, and oil prices deflated 24 percent what they were currently. This doesn't serve as a surprise; coronavirus has instigated mass fears globally, and we've seen the situations it can cause, such as Italy last week.
Interestingly enough, Americans say they are refusing to buy Corona beer out of association with the virus, but beer sales are up 5% overall according to Barrons. Although this seems counter-intuitive, the increase in sales could be due to some Americans stock buying out of fear of the virus. Although certain Americans could be limiting their consumption of the beer, others may be buying more out of hoarding measures, showing that data does not always mean what one would assume it does.
Other economic impacts include some families no longer having a stable income to rely on, and in the case of California, a widespread economic shutdown as non-essential stores stop operating. No longer is money flowing through luxury aspects of the economy. People are still buying products that are inelastic, such as food and electricity.
It is predicted that school will be shut down until the summer by California's current state governer. I wonder what other economic implications will be in the months to come.
Sources:
https://www.investopedia.com/terms/d/djia.asp
https://www.washingtonpost.com/business/2020/03/18/markets-economy-live-updates-coronavirus/
https://www.barrons.com/articles/americans-say-they-wont-drink-corona-because-of-coronavirus-but-sales-are-up-5-51583610529
This article emphasizes a very interesting thing about humans: the occasional lack of common sense. Every time I hear about people refusing to buy corona beer out of fear, it always seems absolutely ridiculous to me. However, I do agree that there are real fears that are motivating some of the other behaviors (housing security, etc). I think the stock market is crashing since more people want to have disposable cash and are frantically selling their stocks instead of waiting to see how the companies will adapt.
ReplyDeleteI think that selling stock right now makes sense. Even industries not directly affected by the virus will be affected by the coming recession. Take Costco for example. Even though they are facing an uptick in business, in a few months, their customers' purchasing power will decrease due to the recession, and they will start to lose business. I think that explains (at least partly) why the entire stock market is crashing.
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