Listen to this article
The Sensex crashed from 41952 to 25981. Marking a quick and huge fall of 38%.
Are you worried about your investments during this stock market crash?
Is this an end to stock market investments?
Let’s further find out. What if you thought there was only negative news about the stock market crash?
“You’ll never find a rainbow if you’re looking down” ― Charlie Chaplin
Table of content:
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Morgan Housel and a shock cycle
How is this related to today’s corona crisis?
Golden Cross & Corona
What happens when India reaches the golden cross?
Read this to find the Endless Hope even during corona crisis.
Morgan Housel and a shock cycle:
Morgan Housel is a former columnist at Motley Fool and Wall Street Journal.
He has written about a shock cycle and it goes like this.
- At first, you don’t see bad news.
- Then you ignore the bad news.
- Then you deny the bad news.
- Then you panic at the bad news.
- Then you start to accept the bad news.
- Then you don’t see good news.
- Then you ignore good news.
- Then you deny good news.
- Then you realize you missed the good news.
- Then you accept the good news.
- Then you abandon your attachment to bad news.
How is this related to today’s corona crisis?
⭐ At first, you don’t see bad news. When the first news of corona in Wuhan started, it started small and was not covered by all media channels. But the news just spread.
⭐ Then you ignore the bad news. As the news seemed to be unfamiliar (as it happened in China), you did not react much to it.
⭐ Then you deny the bad news. As you couldn’t ignore it anymore, as it’s been reported everywhere and people start talking about it in all media.
⭐ Then you panic at the bad news. When you know that corona has widely spread and is taking the lives of many, you start panicking. Especially when you know that it has arrived in India and has many positive cases and find that there is no cure found yet.
⭐ Then you start to accept the bad news even if it’s painful.
⭐ Then you don’t see good news. The media doesn’t report the good news as they may look like they are not bothered about the lives that are lost. When people are losing their lives and jobs, the media feels it hard to tell the good things happening.
Some of the good news are:
The equities have become cheap and as a result, the promoters are buying shares of their own companies. Eg. Bajaj Group, Tata Group, Godrej group, and many others.
You can read the article here!
People in China (where the first corona case started) are recovering in large numbers. Italy (where a high number of cases were recorded) to relax its lockdown measures from 4th May, as the recoveries exceed the new cases. The Indian States, Kerala, and Haryana have the highest recoveries, exceeding the new cases. Are these pieces of good news getting our enough attention and building our hope?
⭐ Then you ignore good news. You fail to recognize the good news as you’re much involved in the bad news. Stock market has slowly recovering and it has crossed 33000 levels on 30th April 2020.
⭐ Then you deny good news. You concentrate on the bad news so much so, that you deny the good news. Any media promoting good news would be criticized by the people.
⭐ Then you realize you missed the good news. You slowly start realizing good news, and see how pessimist you have been all the time.
⭐ Then you accept the good news. Knowing that the risk has reduced or has completely stopped, you would start accepting the good news when you hear news like there is no increase in the corona cases and when recoveries happen.
⭐ Then you abandon your attachment to bad news. When the media and reports give good news, you slowly forget the bad news and start accepting the good news.
Golden Cross & Corona
Golden cross is not a new concept. It is a very simple and common sensical.
Golden cross in terms of the COVID 19 crisis means the day when the new recoveries exceed the new cases.
Both China and South Korea reached the golden cross. China reached the golden cross on Feb 18 and South Korea on March 13. China reached this by social distancing, lockdowns, monitoring citizens, punishments, and rewards for obeying the rules. South Korea reached this point through mass testing.
In Italy, also the recoveries exceeded the new cases. Kerala and Haryana also have recoveries, exceeding the new cases.
What happens when India reaches the golden cross?
When India reaches the golden cross, everything will be slowly back to normal. Economic activities and businesses resume in a phased manner and the stock markets will be set for recovery. Many corporates have no clue about their business plans. Because of the lockdown, people are not planning for long-term. They have no proper visions and hence no proper results.
At first, Tamil Nadu had a lot of confirmed and active cases and an increase in new cases. But now the recoveries are more than the active cases. If the active cases slowly reduce and the recoveries increase, then it becomes manageable, i.e when the new recoveries exceed the new cases.
Slowly the lockdowns will get relaxed. Might be it will take a few more months or weeks to get back to normal. Once we come to this golden cross points, Indian corporate leaders will be able to plan for long-term. They will have clear vision which can intrun bring clear results. This will bring back the hope and the stock market will start to recover even better.
You can also read the following series of articles to discover how to recover your portfolio faster and better from the market crash:
How To Make Your Portfolio Recover Better & Faster From the Stock Market Crash? (Part 1)
The recoveries are not the only good thing that’s happening. There’s more to it.
Let’s see the positive developments during this corona crisis:
1. Low-interest rates
Reserve Bank of India changed the monetary policy to prevent economic collapse and to help liquidity in the economy. This time the loans have a lesser rate of interest. This adds to the advantage of the borrowers.
Businesses and farmers benefit, as they get business capital at a lesser rate which in turn increases production and output. Consumers pay less interest, this gives them more money to spend, which in turn increases sales. This, in turn, helps the companies and hence helps the stock market.
Investors and economists view this as a benefit to personal and corporate borrowing as it leads to economic growth. Low-interest rates hence help the stock market bounce back.
2. Fiscal Stimulus
The government financially stimulates an economy to kick-start growth during this time of crisis. It also credits money into the accounts of the poor to support businesses hit by the lockdown. India announced a $22.5 billion stimulus package to help people affected by lockdown.
3. Cheaper fuel prices
For crude oil-importing countries like India, it is a boon as it helps bring down our account deficit, fiscal deficit, and inflation. It reduces India’s foreign currency outflow, and interest rate pressure. It brings back economic activity and boosts the Indian Economy.
Eg: For every 1$ reduction in Crude, Rs.11,000 Crore is a benefit. So wherever crude oil is used, the production charges reduce and the product cost also reduces. Those goods would be available at cheaper prices.
4. Recoveries and normal functioning
In China (where the first corona case started), people recovered in large numbers. There are no fresh cases and death rates have come down. Most of the outlets are open again and are functioning as normal. This is one of the positive signs that we too will reach this position sooner and everything will get back to normal.
5. India’s GDP in 2021
All the countries’ GDP has come down due to recession. The International monetary fund (IMF) projected India’s growth at 7.4% in 2021. Amongst Emerging Market and Developing Economies (EMDEs) after Bangladesh and China, India stood third with the highest projected GDP for the year 2021.
Conclusion
“We can complain because rose bushes have thorns, or rejoice because thorns have roses.” ― Alphonse Karr.
When there is a lot of bad stuff happening around, we fail to focus on the good. It is the same case here, as we were too involved in the bad news, we missed the good news. It’s time we talk about the positive things happening, rather than just focusing on the negative.
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