A stock market rally is a time of the continuous rise in the prices of indices or stocks. The price change can occur during either a bear market (bear market rally) or a bull market (bull market rally). During this coronavirus pandemic, the prices of stock have been declining. So, financial experts are asking if the rally might end soon enough. Specifically, the United States stock market declined on Thursday. There were concerns about the economy of the US as the coronavirus cases were still proliferating. Many investors are fearing to invest. For example, Warren Buffett just sold his airline stocks because of reused uncertainty amid pandemic.
The Chicago Board Options Exchange Volatility Index
This is a measure of the equity market’s anticipation of volatility based on S&P 500 index option. Its calculation and dissemination are on a real-time basis by the Chicago Board Options Exchange. Often referred to as the fear gauge. The changes in the CBOE VIX index showed a decline in the stock market. On Thursday, the fear index pointed over 18%. As the stock market is declining, the investors buy insurance. The investors will try to push up the prices of put options and in turn upscale the Volatility Index. In the end, as the VIX is increasing, the fear of the investors is also moving in an upward trend as it is now.
Situation In The United States
The coronavirus has hit the US the hardest as it is recording millions of cases. The president decided to reopen the economy slowly but this may come with a ticking bomb. The citizens in various states fear for a 2nd coronavirus series outbreak as it may increase the rate of unemployment. Furthermore, the 2nd series may damage the economy further and result in a greater decline in the stock market.
The Views Of Jerome Powell
Jerome Powell is the chairman of the Federal Reserve. On Wednesday, as he was giving his speech, he gave warnings concerning the coronavirus pandemic. He says that the COVID-19 epidemic may damage the economy to a point of no recovery as the unemployment issue lasts longer. Jerome says that the May employment indication was no guarantee of the labor market recovering fully any time soon.
He predicts that by the end of 2022, the rate of unemployment would be over 5% higher than the beginning of 2020. The Federal Reserve predicts that there might be a decline of over 6% in the Gross Domestic Product this year. Despite the decline, the Fed promises to maintain its economic stimulus project.
The Opinions Of Different Experts On The Stock Market Rally
Economists have different perspectives about the stock market. Others are negative about the market doing good whereas others say that the situation might be a little setback and hence do not judge due to a few days’ feebleness. We see chances of the market going on a bear’s side as investors are getting bearish every day. A bear market is a market whereby the stock market is experiencing a decline. So, the question that every investor is asking himself is whether this might be the end of the equity or stock market rise.
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