How Is the Coronavirus Pandemic Affecting the Global Stock Market?


Right now, the stock market is reacting to the continuing pandemic with increasing volatility. Stock traders around the world are in a state of panic. The reason for that is not far to seek. Stock prices are spiraling down faster than ever. In such a state, small investors stand to lose a fortune. In India, circuit breakers to prevent panic-trading were triggered four times. In times of circuit-breakers, trading is stopped for 15 minutes in the hope that the market shall remain calm.

To the pandemic, in which the cases in India continue to rise, but more importantly which has the whole country in a state of lockdownhas the market in a state of panic. No one can predict how long this state of affairs shall remain.
Stock Market Trading Stopped 4 Times!

It may be alarming to know that the S&P initiated a Level 1 market-spanning circuit breaker during the opening hours on three days of March. These were the 9th, the 12th and the 16th. The breaker was based on a big 7% drop from the previous period’s close. This fall nearly tripled on the 18th of March.

How do Circuit-Breakers Work?

The current guidelines on this format mandate that there should be a 15-minute pause when people are panic-buying. Circuit-breaker guidelines automatically initiate if there is a fall greater than 7% before 3:25 PM (New York Time). These breakers are there to calm the market down, and give investors time to think over their decisions. It therefore initiates when the market is becoming seemingly more volatile. There are several levels of breaks. The first two of these are initiated to halt market trading for 15 minutes. The third breaker when initiated suspends further trading for the rest of the day.

Rising Volatility, Falling Markets

S&P and Dow Jones are both seeing considerable drops due to uncertainty in the market. The Chicago Board of Central Exchange Volatility Index is seeing a steady rise since this February. It was around that time that the virus started to spread globally.

To conclude, we would like to report that the pandemic has created considerable uncertainty around the world. It has caused the single largest single day drops in the Dow Jones Industrial Average in March.

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