COVID-19 is a human tragedy that has a huge impact on the global economy. With most of the economic activities coming to a standstill due to many nations facing extended lockdowns. This article provides the inputs by Abdullah Almanna, an Audit US CPA and a renowned digital travel entrepreneur, founder of tripese.com and has worked in a Big 4 accounting firm for a considerably long period. For him, the recent scenario of the world and US economy is worrisome which will start seeing improvement in Q4 2021 only.
He says “End of February seen the worst decline in the stock market since 1931, it hit a bottom on 24th March and then rallied up. The Dow Jones was at 18,340 and moved up to 24,000 within a short period of time. GDP declined to 4.8%, which was steepest since the great great recession.”
He adds, “The economies worldwide are facing tough times including the US. With recession coming in the unemployment rate is going up with lots of businesses reducing manpower, the situation is not going to improve any time soon, not only this large number of people are facing pay cuts due to mounting losses industries are facing. Crude oil prices are at their lowest level ever and oil companies are already under huge debts, if they are unable to pay their debts in time, it will impact the banking sector with banks incurring huge losses. The insurance sector is also moving in a negative direction.”
Abdullah Almanna further says, “If the situation gets better from the virus, which is not the near possibility due to unavailability of vaccine, people will still avoid non-essential traveling which will impact aviation, transport and travel industries. While Domestic travel sectors may get quicker recovery, the international travel sector may have to wait longer. Hotels, casinos and the retail industry will also feel the pain as people will avoid going to crowded places.”
He suggests, “People are looking at stock prices as if it is cheap, and looking at stocks with huge dividend yield and low PE ratio without looking at the fact the earnings would be much less than they were in 2019, and growth will be affected. The stock market will be way overvalued at current prices, and we will have a clearer picture in Q2.” I might start nibbling with strong balance sheet companies if Dow Jones goes back under 20,000” he sums up.
Disclaimer: The views, suggestions and opinions expressed here are the sole responsibility of the experts. No Forbes India journalist was involved in the writing and production of this article.