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What could be the impact of falling global markets on economy?

Team Veye | 16 Mar 2020

What could be the impact of falling global markets on economy?

First thing that is thought-provoking, in the backdrop of global market slowdown along with a global pandemic, is whether our economy has enough shock absorbers to ward off further trouble in the markets. And has the golden run for stocks taken a vicious turn. What has hit the sentiment so hard.

Falling global markets and its impact could be fully ascertained by keeping in mind that China is Australia’s biggest trading partner and is part of the supply chain for all consumer products.

Our worst affected sectors immediately would be exports and tourism not to mention education where the government had eased some of the restrictions.

While most economists were forecasting quarterly economic growth of 0.3 to 0.4 percent and annual growth around 2 percent, Australia’s economy grew by a little more at 0.5 percent in the December quarter and 2.2 percent over the past year. The latest meltdown can have a greater short-term impact on our economy, maybe causing a quarter or two of negative growth.

In fact, when the central bank's world over are cutting rates and infusing liquidity, a part of their job is to keep confidence high. Only confident people are more likely to spend and boost further economic activity. Due to the complete integration of the global economy no individual action by a country could be sufficient. Many countries are expected to announce economic stimulus measures.

When unusual events that are often driven by panic cause sudden drops in prices could be the best possible time to begin investing because asset prices often fall hard, meaning you can pick up stocks, bonds, mutual funds, real estate, private businesses, and more for far less than you could just a few years ago. As Warren Buffett has quoted, we simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.

 

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