Will there be another stock market crash in 2020?
- The coronavirus restrictions have led to an unprecedented drop in economic activity. Because the UK’s economy relies heavily on the services sector, it has suffered more than many European countries. However, the contraction is certainly global. Furthermore, the second Covid-19 wave has started too. For example, the US is seeing a rise in coronavirus hospitalisations, in Texas and California in particular.
- Apart from the Covid-19 downturn, there are many other political and macroeconomic factors that investors have to consider. First of all, the risks of a no-deal Brexit are extremely high now. The Government seems to be taking a hard stance towards negotiations with the EU. The main emphasis is on executing Brexit before the December deadline. But it looks like agreement on many issues, including business regulations and fishing rights, is a long way off.
- There is another risk that could lead to a stock market crash in 2020. This is the political situation in the US. The Covid-19 downturn and current protests are taking place just before the presidential elections. This could lead to higher market volatility, not just in America but all over the world. The UK’s markets are at risk as well because many Footsie companies are multinationals and heavily depend on the US.
- The political situation in the US and a hard Brexit would be much more harmful for firms that have close links with the US and Europe.
Source: MotleyFool Finance