COVID-19 and Its Impact on Financial Zone and the Real Economy

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The pandemic of the COVID-19 virus happened 10 years after the Great Recession and Global Financial Crisis ended (GFC). While long-term trends in the housing, mortgage, and banking sectors contributed to the Great Banking Disaster (GFC), the COVID-19 issue was a total surprise.

Despite the concerns of numerous specialists, the coronavirus seems to have infiltrated governments, enterprises, and families. It’s not about money or economics; it’s about the health of millions of people who have been severely affected. COVID-19, on the other hand, quickly turned into a financial and economic catastrophe because of its impact on supply and demand, as well as on productivity.

Firm and households

Many businesses need employee contact. Many items and services are no longer available. The same goes for many products and services. People are hesitant to utilize these items and services again for fear of viral infection. Government prohibitions on different activities have definitely contributed to economic recession in some circumstances. In 2020, the US GDP fell by 3.5 percent, its first annual decrease and largest since the Great Recession and WWII. More than 500,000 people have lost work. In April 2020, the U.S. unemployment rate rose from 3.5 to 14.7%. It has now risen to 5.9% in June 2021, the highest level since the financial crisis. Troubled economies prevailed in July 2021. Similar trends have emerged in other nations. Despite considerable advances in vaccine development, much remains unknown about how the virus may evolve in the months and years ahead.

Financial markets

Several financial markets were impacted as a consequence of the COVID-19 problem and its accompanying uncertainty. Even the U.S. Treasury market began to exhibit signs of stress in March 2020. The financial crisis significantly impacted bond markets and money market funds. The financial markets’ comeback was essential. S&P 500 Index lost a third of its value in February and March 2020 during the COVID-19 crisis, but it recovered it all by August and has continued to grow. Immediately after the substantial rise in February and March 2020, corporate bond rates swiftly recovered to pre-crisis levels. To a large extent, the Federal Reserve’s rapid recovery of financial markets in the United States may be attributed to their efforts. It’s still possible that there may have been some discrepancy between economic growth and financial market figures.

Is the COVID-19 crisis just “another” large-scale shock?

No way. Instead of the Great Recession and the Global Financial Crisis, which were past financial and economic disasters (GFC). A catastrophic epidemic harmed not just people’s health but also the global economy, causing market stress not seen since the GFC. While Congress and the Federal Reserve acted quickly to address the GFC’s lessons, the U.S. economy has yet to recover fully. Leaving aside the cause of the shock, the scale and scope of the engagement are unprecedented and will impact economics and finance research for years. Now, after so many years, Voir plus de détails.

Government reactions have a significant impact.

The financial markets’ uneven recovery after the pandemic was caused in part by variations in country-level COVID-19 case rates, coronavirus vaccination rates, and fiscal stimulus expenditures. However, it isn’t easy to specify precisely how each of the three elements played a role since countries tend to differ in more than one area. Germany’s financial markets may have returned quicker than those in France due to lower vaccination rates and more government spending. Although Germany’s case rates and governmental assistance were lower, the U.S. market recovered more quickly than the German market did. In spite of having one of the greatest immunization rates in the world, the U.S. financial markets remain below pre-corona levels (although this is likely also affected by Brexit).

COVID-19’s impact on many industries

After a coronal mass ejection, the financial markets experienced a shaky recovery. The NASDAQ, which technology companies dominate, claims to be recovering faster than other stock markets. Lockdowns have spurred an increase in online commerce, making Amazon and PayPal two of the NASDAQ’s fastest-growing companies in 2020. Two well-established industries, energy, and tourism are expected to lose significant value by 2020. Considering the pandemic’s effect on tourism and public transit, this isn’t a surprise. The pandemic was able to recover more quickly from financial markets with a high concentration of shares for enterprises earning from the epidemic than from ordinary markets.

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