How COVID-19 Has Impacted Trading Strategies in 2020 & Beyond

Coronavirus has impacted every area of life all around the world in 2020 and the effects of the pandemic will continue to be felt even when the threat of the virus has passed - which could still be for some time. This has caused significant financial market volatility and investor anxiety with traders having to alter their strategies to accommodate these strange and unsettling times.

The Initial Effect

The COVID-19 pandemic has led to unchartered waters in terms of the financial markets, so it is no surprise that it has been chaotic since the virus began to spread around the world at the start of 2020. With the virus disrupting industries and government-enforced lockdowns coming into effect all of the world, the Dow and FTSE saw the biggest quarterly drops in the first three months of the year since 1987, leading central banks to slash interest rates to encourage borrowing and spending.

A Slight Recovery

Since April, global markets have made a slight recovery largely due to governments intervening, but it is still extremely volatile largely due to fears of a second wave which many places over the world are now seeing. This has eradicated hopes of a V-shaped recovery which could have a severe long-term effect on a number of industries, including leisure and travel. In fact, legendary investor Warren Buffett dumped his entire holding of US airline stocks in May stating that “the world has changed”.

Concerns Over Second-Wave

With concerns over a second-wave, recessions happening all over the world and unemployment on the rise, it is understandable that investors are stressed and taking drastic action with the stock market in chaos. Panic is the worst thing that an investor can do right now as it is always important to take a long-term view. 

Looking Forward

There will inevitably be both winners and losers when the dust has settled, and life will be quite different to how it was before. For stock traders, some stocks have been so significantly impacted that a recovery is very unlikely. On the other hand, coronavirus has almost accelerated the digital transformation of many economies and this provides valuable opportunities for new stocks. Additionally, it is important to eye the industries that are agile and have been able to quickly adapt to a changing situation as these are more likely to find success. The continuing fluctuations in currency values means that significant opportunities remain for forex traders to profit from global uncertainty.

Cryptocurrency on the Rise

Looking forward, it seems that cash-based societies are waning and the rise of cryptocurrencies has accelerated. People are now hedging their interests with digital and decentralised currency which could be a major trend moving forwards and an area that any investor will need to keep an eye on.

The financial markets have been hammered by the coronavirus pandemic in 2020 causing extreme volatility and investor anxiety. While the markets have had a gradual recovery as the year has progressed, the future remains murky as the pandemic rages on and the economic impact that this is having all over the globe.  This has led investors to have to reconsider their strategies and now think ahead to what life might be like once the threat of the virus has passed.