Even though the economy is experiencing record breaking GDP growth, it seems that this has not done much for investor confidence. The main reason that the stock market is still seeing some decline is due to many investors terrified of the economy falling back into a recession and out of the recovery. These investors definitely have a lot of ground to be concerned about due to both North America and European covid cases getting out of control again. Especially with the two biggest economies in the European Union (France and Germany) are both enforcing stroger restrictions like with France shutting down all non-essential business and restaurants for 4 weeks and with Germany doing the same and advising citizens to stay inside. These harsh restrictions are projected to have France's GDP drop by as much as 4 percent and Germany's GDP is expected to drop by one. With all of this happening it is no surprise that inventories are having a hard time feeling safe to invest their money when at a moment's notice we can see the economy shut down again and with how many new cases the US is getting it would not surprise many if the US imposed restrictions much like Germany and France. Thanks to the recorded growth many companies are increasing their dividends payments and buybacks. This shows that the companies are not that worried about receiving funding in the future.
With so many different regulations being presented by a number of different countries it is no wonder many people are not wanting to invest during this uncertain time. What do you think could help give investors more confidence to invest?
https://www.cnn.com/2020/10/29/investing/premarket-stocks-trading/index.html
I think investors would like to see a "long-term" COVID-19 policy. They want to know how governments will or will not aid the economic recovery. Further, I think investors would like to see a consistent procedure that is put into place if cases pass a certain threshold. Currently, responses to increasing case counts are rather ad hoc and disconcerting for investors.
ReplyDeleteI agree that a long term policy would give investors a lot more confidence in the economy because they would be able to plan well in advance. Right now it makes sense that things are harder than usually and current situations can steer away investors.
DeleteI agree with Spencer that people are unsure about what is happening in response to the virus from the government. The stimulus not being passed even before the election is a great example of uncertainty. We have seen France now shutting down again with a high number of cases. We see cases on the rise in the US as well, so setting a plan would increase confidence instead of everyone being on edge about what could happen even in the near future.
ReplyDeleteI believe with the election season coming to a close and the holiday season on its way, investors will feel a bit more confident to invest. A decrease in covid cases would definitely help, but I believe we will continue to see cases as long as we wait for a vaccine.
ReplyDeleteI think you are right as far as a post election economy. I believe that when the uncertainty of the election passes, others will feel more confident to invest the money. I'm not sure if the investment rate will recover back to pre-covid or not, especially with COVID still being a problem, but I do think that the economy will recover enough to stay afloat.
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