3 ways that coronavirus has shaped the financial markets in 2020

With 2020 edging towards close of play, it is difficult to remember a headline that didn’t include coronavirus. The pandemic has shaken the very foundations of the globalized world and continues to jeopardize livelihoods on all continents. The financial markets are notorious for their vulnerability to socio-cultural factors and world-changing events. 2020 has been fraught with both, which have shaped the financial markets throughout the course of the year. With further challenges ahead, we look back at some of the key impacts of coronavirus on the world’s financial markets.

Safe assets over risky stock investments

If the coronavirus pandemic is to be remembered for one thing, it might just be the significant impact on global and national economies. The uncertainty caused by the question of financial recovery has dramatically increased the price of gold and other commodities which are seen as safe assets. Investors have been hedging their interests in such commodities largely because of the security and intrinsic value associated with them, as opposed to the risks accepted when trading in the major stock indices. Alongside this, investors still have the juggernaut of the U.S. election to navigate, which itself could radically transform the global economy and further impact the value of various commodities and stocks. 

Significant changes in demand

Demand has shaped the financial markets significantly in 2020. Lockdown and restricted air travel suffocated the demand for fuel across the planet. Earlier this year, the price of oil had dropped to an unprecedented low in recent times, with barrels selling for USD 11.00 in April. Compare this with the price of oil at the start of the year (around USD 61.00) and the effects of the pandemic are unambiguous. Demand has also been fundamental in the boom and bust of many stocks in 2020, as companies were forced to adapt or risk failure in the wake of the global ordeal. Companies like Boeing are some of the worst affected by the pandemic as they come to grips with the full effect of stifled demand in the aviation supply chain. However, it’s not all been doom and gloom, as some stocks have boomed in 2020 because of increased demand…

Another digital boom

The coronavirus pandemic has been a blessing in disguise for leading digital companies like Amazon and Netflix who saw their stocks rise exponentially in the first half of 2020. The lockdown measures across the world resulted in a significant surge in demand for online shopping and entertainment services. The sharp rise in technology stock values is evidence of the continuation of digital transformation in many regions. Meanwhile, the pandemic has had a catalyzing effect on the discussion of digital currencies in global think tanks. China has recently trialed the launch of a digital currency, highlighting the movement towards a cashless society. With the continuing prevalence of cryptocurrency and blockchain around the world, a clear trend is prominent.

Coronavirus has impacted every continent in 2020 and the threat still stands. With many nations in the Northern Hemisphere facing a bleak winter and pivotal events such as the U.S. election, the financial markets are going to continue to face uncertainty.