How has COVID-19 Affected the Financial Market: An Overview
A global pandemic is something that nobody could have predicted at the start of 2020. For the whole of 2020 and most of 2021, the world has adapted to a new way of living. From limited contact with others to working from home, the pandemic has impacted how businesses and industries across sectors operate to survive the unprecedented situation we found ourselves in. As financial health is inadvertently related to physical health, the effects of Covid is an indicator as to where the repercussions were the most drastic initially.
As the virus continued spreading worldwide, it reduced millions of working hours and jobs across nations. Ranging from daily wagers to corporate industries, to some degree, all firms had to bear massive losses in terms of jobs and money.
The nations that felt the impact the hardest were areas that had the largest number of labourers. This meant that their losses from the pandemic were tremendous. Despite the world slowly returning to normal, there are those still reeling under the pressure and stress of the pandemic, as well as the uncertainties about what the future holds. For instance, many are left wondering how the pandemic has changed the way we work forever.
Many industries faced the impact of the pandemic, some with positive outcomes and others with negative ones. Here’s how Covid affected the financial market in various areas.
Impact on Stock Markets
When the news of Covid started spreading as quickly as the virus itself, FTSE and Dow Jones witnessed a drop of 3 per cent in late February. This was a clear indication of the worsening situation of the world outside of China, where the outbreak occurred. This drop also led to benchmark indices falling to the abyss following the uncertainty of the market in Europe and Asia.
Due to increasing worries surrounding the pandemic outbreak, the stock markets were hit badly, with many marketplaces registering massive falls since the early 2000s.
Halt on Travel
Undoubtedly, the industry that faced the hardest hit was travel, in particular airlines. Flying is one of the best ways to commute if you are travelling great distances. However, to control the spread of the virus, flights across countries and continents were cancelled. Reports showed that airlines were facing a loss of $84.3 billion in 2020. For the vast majority of 2020, travel between countries became strictly prohibited, except for work. While travel and tourism are slowly beginning to open, and flights are beginning to get booked, there is still a long way to go before the industry is back to the level it was before the pandemic.
Ultimately, every sector across all industries around the world faced the impact of Covid. While there were the fortunate few businesses that thrived, there were some that closed their doors. Moreover, some had to say goodbye to loyal staff due to lack of funding, inactivity and decreased demand for their services.
Effect on the Oil Market
Compared to previous years, the pandemic led to the collapse of the oil market in 2020. Since transportation and trade became halted, their demand for consumption went into decline. As a result of the lack of factory activity and travel, it led to a shortage of demand.
Impact on Pensions
The unprecedented circumstances individuals faced due to the pandemic highlighted how pension funds serve a key social function in supporting economies and citizens. Thus, ensuring benefits for old-age income. The impact of Covid on the pension industry comes in a variety of forms. The pandemic led to countless people being out of work. This was due to the business having to close for good or due to being on furlough.
Due to being unemployed or on furlough, many reduced the amount they contributed towards their pensions as they didn’t have the funds to contribute their usual amount. Older generations who have reduced their income because of the pandemic have been put in a situation where they have to consider the possibility of going into early retirement.
Reduction of Working Hours
Aside from causing people to work from home, the pandemic also meant that many individuals had to reduce their hours. This includes only working a few hours a week and, for some, none at all. For some, the pandemic left them without a job, which drastically raised the total number of unemployed people.
As the world begins to reopen and restrictions lift, markets begin to bounce back. The working from home option has proven wonders for numerous companies. They have highlighted a rise in productivity levels amongst their staff. With investment and trading, more people are beginning to use online brokers to start online trading.
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