International Policy Digest

Darshan Vaishnav Photography
Business /18 Oct 2020
10.18.20

5 Ways COVID Impacted the Stock Market

Public health isn’t the only area of life the COVID-19 pandemic has affected. Throughout the year, stimulus packages, lockdowns, and changing consumer trends have had various financial consequences. These changes have had a considerable impact on the U.S. stock market.

The stock market and the national economy are not the same things. Positive performance in stocks doesn’t necessarily indicate economic stability for the majority of Americans. Still, investments play a crucial role in many people’s finances, so these changes are important.

1. Early Losses Across the Board

The first and most noticeable effect COVID-19 had on the stock market is an initial plunge. Between Jan. 23 and March 6, the NASDAQ-100 fell 7.4%, followed by another 12.4% over the next two weeks. The S&P 500 reacted similarly, falling 10.6% between late January and March, and another 14.9% in early March.

As social distancing regulations went into place and people lost their jobs, spending decreased. Virtually every sector experienced a downturn in the face of the economic standstill. While many stocks have since recovered, this early COVID crash was historic.

2. Tech Stocks Skyrocketing

One notable exception to the stock market’s early decline is the technology sector. As companies adopted work-from-home models and people stayed indoors, tech stocks surged, reaching unprecedented levels of success. The videoconferencing service Zoom is up nearly 500% since the beginning of the year.

Technology provided a way for people to meet, work, shop, and entertain themselves from their homes. As a result, when people could scarcely leave their houses, tech adoption soared. As people get used to this new normal, the trend could continue well past the pandemic.

3. Volatility for Commodities

Not all sectors have been as fortunate or consistent as tech. Commodities have experienced some turbulent stock performance through the pandemic. Commodity ETFs plunged between February and March, but some have recovered just as dramatically.

For example, precious metals have seen a 22.10% increase despite recent losses. Others, like agriculture, have experienced recent gains but still haven’t recovered completely. While commodities have traditionally been a haven from market volatility, they’ve proven just as unstable as anything else amid COVID-19.

4. More First-Time Investors

Despite or perhaps because of market volatility, the pandemic has spurred a rise in first-time investors. As stock prices plunged, millions of new investors started buying in hopes of substantial returns. These new traders, many of them young, hadn’t purchased stocks before due to high prices.

The lows created by the COVID-19 pandemic gave new investors the perfect opportunity. While no one would argue that the virus is a positive thing, it has made stock trading more accessible.

5. Health Stocks See Early Decline, Late Recovery

Health stocks, like many others, fell dramatically in the early days of the pandemic. Despite an increased need for hospitals, the business of medicine declined as facilities had to conserve resources for more dire, less profitable procedures. For example, elective surgeries fell by 55% compared to last year as hospital beds went to COVID patients.

As infection rates begin to even out or decline, health stocks have started to see recovery. Now that there’s a backlog of patients wanting elective procedures, a considerable rise could be on the horizon. When the pandemic subsides, health stakeholders could see substantial returns.

The Full Effects of COVID-19 Are Still Unknown

It’s still unclear how long the pandemic will last and what will happen economically. Future lockdown measures or stimulus packages could cause further changes in the stock market. The uncertainty this year will continue for some time.

Whatever happens, it’s become clear that the stock market is not immune to COVID-19. Markets may not have reacted consistently, but they have all changed one way or another. As the pandemic continues, more of these changes could arise.