THE IMPACT OF COVID-19 TO THE UNITED STATES OF AMERICA CAPITAL MARKET SECTOR
The economy of the United States of America is considered one of the largest and most profitable economies in the world. Many companies around the globe compare their economic trajectory to the changes in the American economy. This clearly shows how the countries largely rate their economy in the line with the changes in the US dollar.
The coronavirus outbreak in china and its subsequent spread to other countries including the United States of America has caused severe effects to the global market. The stock markets, America included recorded several shock waves, and financial volatility continued to increase in line with the pandemic uncertainty .There has been a negative impact on economics such as trade, tourism, transport (especially with the closure of airports and train stations),food production and manufacturing. With the negative effect on these sectors, the stock market adversely experienced a fall in stock prices and share value.
The economic fall brought about by the outbreak has had grave impact on the US Capital Market and economic growth in general. The country has suffered negatively in the financial market such as bond, stock and natural resources market. The pandemic has put the country in a virtual lockdown forcing the countries’ financial experts and economists to come up with ways to deal with geo-economic challenges that might precedent the crisis. The country which was gearing up for election in the backdrop of the pandemic has seen most of its companies being shut, or downsize on production especially with the introduced ‘work from home’ policy. This has greatly led to a drop in its economic growth and having damaging effect on the dollar value in the other countries. With the fluctuation on the dollar value in comparison to other nations, the Us capital market has seen a fall in its major shares thus impacting negatively on its economy.
The surging number of deaths in the country has also had a negative impact on the economy considering that amongst those dead are the economic professionals and advisors, financial analysts and professions in different economic sectors. This means a loss in talent hence a slow growth and economic turnaround.
The Us employment rate dropped where 30.2 million persons were rendered jobless by 11th of July 2020 and the GDP fell by 32.9% in annualized rate. This was inevitable considering the need to downsize on activities that were spreading the disease such as gatherings. It is also worth noting that the employment decline did not affect the whole American economy but majorly the leisure sector such as tourism and entertainment.
In the beginning months of the year 2020, the US congress passed some major stimulus packages as part of an aggressive effort to fight both the COVID -19 pandemic and its economic impact .The legislation cautioned its citizen from the wraths of the outbreak .The president also signed into law an emergency appropriation and pandemic counter measures bill that includes 8.3 Billion in government spending. This was to counter the pandemic in the country and help sustain the economy thus preventing the country from going into a financial crisis considering most economical activities had stalled or slowed down.
The pandemic in the country resulted to a decline in stock market in the early months of the year. Implied volatilities of equities and oil have spiked to crisis levels, and credit spread on non-investment grade debt have widened sharply as investors and financial institutions reduce risk .This gesture by financial institutions saw a fall in capital shares since most companies could not sustain themselves after being denied loans and others such as Diamond Offshore Drilling and Gold’s Gym filed for bankruptcy. This clearly shows how grave the pandemic has been on the economy especially the Oil and Gas sector. This has greatly affected the US Financial Market volatility thus having a negative impact on its Capital Market Sector. The bulk of the deepest contraction as reported by the country’s Commerce Department occurred in April when restaurants, factories, bars, finance institutions, schools among others shuttered. Closure of the money generating avenues meant a fall in monetary circulation hence a fall in per-capita income. This alternatively affected the capital market leading to a drop in share value and depreciation on the dollar value.
The pandemic has had the following consequences on the US economy which has led to a slump in the capital market;
Business investments tumbled at a 27% rate due to closure of existing businesses and degradation in willpower to open new ones.
An increased infection rate and a high mortality rate that decreased manpower hence slowing economic growth.
Unemployment due to collapsed companies and bankruptcy.
Crush in oil prices leading to deep cuts in shale oil production and layoffs.
Investment in homebuilding fell by 38.7%.
The pandemic has created a devastating loss to the global economy and future preventive measures ought to be put in place. Banks, companies, financial institutions and marketing institutions have been left with no option but to be vigilant to deal with such occurrences in the foreseeable future. Even though many of them are trying to find a way to rise from the shambles of the pandemic, assurance is important in order to create confidence that the economy will stabilize and create a path towards normalcy and restoration of the capital market graph. Jobs have been lost, companies have gone under, economy has deteriorated but humans must still survive. This leaves no choice but to restore the economy and bring the world back to order. If we cannot fight the virus, then we must live with it but to our economical advantage.
Written By kevin Omondi