Despite all the tragedy of the situation around the coronavirus pandemic, the financial markets become extremely "boring", but, as history and experience show, these are the moments that make it possible to realize investments with the greatest profit.
A noticeable decline in global stock markets opens up broad prospects for investment. If, for example, volatility in the currency market has significantly decreased, commodity markets remain in direct proportion to the growth in demand for commodity assets, which is directly related to the situation in the global economy, then the stock market provides incredible opportunities for the purchase of much cheaper securities of companies.
For example, many US stocks declined in price by 50 percent or more. A similar picture occurred all over the world. It is likely that the process of falling has not ended yet, but, in our opinion, it will slow down as investors get used to the new reality and they will not be so shocked by the news about the number of victims and infected. A person gets used to everything, and not only to the good.
Why is it probably worth it to start buying stocks of companies? First, you must be aware that, for all the tragedy of the situation, a pandemic will not last forever. China has already managed to stop or stop the growth of the diseased and, as a consequence, the dead. The same thing will happen in Europe and North America. The beginning of stabilization of the situation will be the trigger that will start the process of buying shares by investors.
In this situation, one should also take into account the unprecedented assistance measures that the world's largest central banks have already begun to implement. The Fed lowered interest rates to zero and launched a quantitative easing program by $ 700 billion. Similar measures are also being taken by the ECB, RBA, the Central Bank of Canada, Japan and Switzerland. As expected, they will be joined by the RBNZ and the Bank of England. It should also be borne in mind that there are coordinated measures between these regulators, which should support dollar liquidity in the global financial system. In addition, it must be understood that the reason for the collapse of the markets was precisely the situation in which business and manufacturing activity fell in China and other economically developed countries. The return to workplaces of the economically active population will lead to an explosion of production activity. We also believe that economies will begin to experience some shortage of raw materials and finished products after the pandemic. This will cause a sharp increase in economic activity and consumer demand.
We are sure that the weakening of pressure from the pandemic primarily on investor sentiment will be the reason that will contribute to a sharp increase in demand for risky assets.
Forecast of the day:
AUD/USD is trading above the level of 0.6065. We believe that it is necessary to sell it after crossing this level with a local target of 0.5985 in the wake of the expectation of a decrease in RBA interest rates, which was announced at the protocol of the last meeting of the regulator presented today. In addition, as long as there is pressure from the pandemic on the markets, the US dollar will be in demand.
The price of gold remains under extreme pressure in the wake of the pandemic. We believe that prices still have the potential for a local decline by 1444.30, while they remain below the level of 1500.00.
