Sunday, July 5, 2020

Speculative stocks: The current scenario of the Stock market

The world witnessed several disastrous economic events due to the pandemic, ranging from the negative oil prices to the crashing of the stock market. All investors were in distress over the falling trend which actually dates back to the panicked headline “stock market crashes!” a week after the WHO declared COVID-19 a worldwide spread pandemic and advised a strict lockdown.

The investor psychology also comes into play when we talk about the falling prices of stocks, the fear that followed the guidelines published by the WHO resulted in the worst week since the start of the 2008 recession. Investors started selling their stocks in order to step out of the markets. The global stock market saw $5 trillion being swiped away within days as a result of volatility. The simple answer to what causes volatility is uncertainty. When investors are scared, nervous, or uncertain about future economic growth, a company’s profit forecast, or geopolitical stability, they often respond by selling their investments. “Part of the stock market decline is the result of stocks being overvalued,” economist Mark Weisbrot, co-director of Center for Economic and Policy Research, a Washington think tank focused on economic policy, told BuzzFeed News — meaning the drop was partly just the market correcting itself. Therefore, it would be correct to say there are and were conflicting views in the market given that the situation the world is facing is unique in itself.

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Cut to May-mid when the drug trials began, and the stocks market gained normalcy and saw positive investor psychology, Stocks opened with modest gains Tuesday, 2nd June 2020 as investors looked past nationwide protests against police brutality and toward a second-half economic rebound from the devastation spurred by the coronavirus pandemic. The Dow Jones Industrial Average opened with a gain of roughly 100 points, rising around 0.4 percent after the fourth night of demonstrations across American cities, some of which were broken up by police with tear gas and rubber bullets. The S&P 500 ticked less than 0.1 percent higher, while the Nasdaq composite opened with a loss of 0.15 percent.

Wall Street has ramped up its bets on a third-quarter recovery from the economic crisis driven by the pandemic despite rising jobless claims, lagging unemployment and stimulus checks, a potential wave of evictions, and severe financial pressure across several industries. The May jobs report set to be released Friday is likely to show the unemployment rate rising toward 20 percent, closing in on the 25-percent peak seen during the Great Depression.

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As the world saw positive global cues, the Indian stock market was still in a state of depression due to the disappointment over the Atma-nirbhar economic package announced by the Indian government, Coronavirus came out of syllabus for the world, and back home Indian markets were already facing issues like a growth slowdown, weak earnings, corporate governance issues in several companies and weak reforms for the investors. The proactive investors suggest a simple technical approach to understanding when stocks are positioned to rise or fall over the long term is to take a weekly candlestick chart and overlay a 50-week moving average on top, Implementing a technical approach like the one outlined above is the only mechanical and straightforward way to remove emotion and bias from one’s investment decision process as what we are battling with is relatively unique and unpredictable.

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