What is the recommended approach for the stock market during the pandemic? Time to find out.
As the #covid-19 pandemic hit, businesses closed, and unemployment skyrocketed. Traders started selling, and prices tumbled. Then, governments launched stimulus measures to bolster economies and put them back on track. The markets reacted fast. Indices got close to record highs yet again. Stocks rose. What about now, in late August? Where do things stand?
Here are 3 things to watch for in the stock market under the cross of Covid-19, according to the experts:
1. Learn how COVID-19 impacts industries
A pandemic of such magnitude impacts everything in its way. The financial markets make no exception.
Let’s stop for a moment and analyze the #stock market. Many companies that crash don’t go down because of their faulty business model. They drop because fear has driven people out of the market and sent prices tumbling.
We need to understand that the event will affect industries differently. Some companies see their businesses flourish, such as businesses that sell food, medical equipment, and other tech-related goods & services. Others, such as companies in the airline industry, experience deep ongoing losses that, in some cases, lead to business termination.
Let’s take a more direct example: the travel and e-commerce industries. Demand has gone to ultra-low levels for the first one, while demand in the other has witnessed unprecedented growth.
Nowadays, traders look at companies that won’t be affected in a way that endangers their very existence, but also at industries they understand and resonate with. For those reasons, they think about how COVID-19 will impact the global economy and how it will impact the businesses they're monitoring. Understanding the potential impact on every market sector that you're targeting is critical. And you can achieve that if you follow the latest financial news and coverage.
Experts tell us to look for companies and industries that have sound valuation and power, such as blue-chip stocks. However, one can take a different approach to investing in the stock market during the Covid-19 crisis. Still, the risks could prove far more significant.
2. Set your eyes on clear targets
After you’ve settled upon the industries you’d like to trade, it’s time to move to the next step: deciding what stocks to pick. Generally, you should choose companies that:
- you follow on a daily or weekly basis
- are meaningful to you
- benefit from strong leadership and management
- have recorded a history of reliable financial figures.
If a company meets these criteria, put it on your trading list. No matter if you fancy trading #CFDs on stocks or prefer the old fashioned stock investing, you need to take your chances!
Don't forget to check the economic calendar to see the next important events scheduled for your go-to stocks. Knowing in advance what to expect could prove immensely helpful and could help you fine-tune your strategies and approach.
3. Plan for the longer term
We cannot stress this enough: in today's markets, thinking in the long-term will help your trading. Everyone says it: don’t hope for stocks to recover from the pandemic effects. There's a strong chance that many of them won’t recover soon, like the apparel retailers. Also, the airline industry will probably be scarred for life.
However, plenty of companies will thrive. That’s because they:
- boast a high demand: businesses such as grocery stores and delivery companies, experience high demand, and could potentially continue to benefit from the pandemic.
- have the price control: giant retailers like Amazon and Walmart have the edge in their respective industries due to their huge popularity and market valuation.
- are indispensable: companies that offer goods and services such as energy & food
During the global pandemic, the markets face serious concerns. What you can do as an investor is to closely monitor the action and jump into trading after you’ve carefully analyzed your options.
Source: investopedia.com, babypips.com.
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