Year in Review: COVID-19’s Impact On the Stock Market

By Evan Wong

 

In March of 2020, news of a novel COVID-19 virus sent financial markets across the world into a historic selloff, the Dow Jones Industrial Average (DJIA) plunged over 34% in a month. Unemployment rose to ~15%, as fear over how deep the market would fall and how long it would take to recover rose need (CNBC 2020). Many people felt similar to Chad Gyabin, a retail investor, who said, “It was pretty scary, watching my investments fall so fast.


It has been over a year since the crash, while the vast majority of Americans have not resumed their pre-pandemic lives, many stocks have since recovered and risen above their pre-pandemic prices. But at the same time, some stocks still have not fully recovered. Industries like technology and communications have seen significant increases in share price. “The technology sector added more than 40% for the 2nd consecutive year(Fidelity Stock Market Report 2020). The pandemic has increased some business aspects, continuing a multi-year trend of outperforming the general market.


On the other hand, the travel and hospitality industries have yet to reach pre-pandemic levels. Surprisingly, publicly traded restaurants have more than recovered. Dow Jones futures trader, Anthony Ryan, attributes this phenomenon to larger chain restaurants having better technology and resources which help them find workarounds to continue their work, while local and mom-and-pop businesses may not have the same resources to see the same results. Even though the stock market has generally recovered, it isn’t necessarily reflective of the actual economy.


The recovery of the 2020 crash was far quicker than other market crashes. In comparison, it took about 4 years after the Great Recession of 2007-08 crash” (Forbes 2020). One reason why this recovery was so fast was due to the government injecting trillions of dollars into the economy in the form of stimulus checks. “The feeling that the government had a plan decreased fear which helped the market recover,” adds Ryan. Actions such as stimulus checks and bailouts have certainly helped aid the recovery. Despite these efforts to instill confidence in the markets, there is a growing concern over hyperinflation in the US economy.