Navigating the COVID-19 Virus
Ever since news broke of the Corona virus in China, we have seen the world’s financial markets going into a tailspin and macroeconomic forecasting going into hyperdrive. The virus has since spread to more than 95 countries and has claimed 4 641 lives globally and the financial markets have experienced unprecedent volatility with several exchanges experiencing circuit breakers and rating agencies doubling their recession probabilities for the first half of 2020. Here is what we have experienced so far.
- We have seen two black swan events happen with the first being the novel coronavirus impacts and the other one being Russia pulling out of OPEC and oil prices falling over 30% in a matter of hours
- World markets have sharply fallen losing between 15 and 20% of their value from the recent highs
- We have seen emergency rate cuts from central banks around the world
- Travel restrictions around the world with the most recent one coming from the United States of America
- The South African economy has gone into a technical recession
- The South African Rand breached the R17.00 mark to the greenback and continues to look vulnerable.
What to expect going forward
Extreme volatility should be expected unless the infection rate of the corona virus slows down and we may see more stimulus from the central banks and governments to try and bring in the much needed liquidity on the markets, however a tapering of consumer spending could limit the ability of companies to maintain or raise prices thereby squeezing margins. We may also see an emergency OPEC meeting to try sort out issues with Russia and bring stability to the oil prices.
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FOREX – TECHNICAL ANALYSIS