1. A potential second wave of the infection

A potential second wave of the Covid19 virus is a real possibility according to health experts, as the current lack of vaccine means there’s is at least a small chance of countries being hit with a second wave of the illness. And with the lock down restrictions being eased in many countries around the world currently, many health professionals in the field fear the possibility of a bigger more potent wave of infections that could soon be a reality. Estimates on when this might happen vary, from the summer to early autumn.

2. The temporary effects of the Stimulus packages

We have witnessed an injection of stimulus packages by various central banks as of recent, which helped fuel the recent rallies we have seen in the stock markets. However, the positive effects resulting from these stimulus packages are usually short lived, as once the money runs out well notice more businesses struggle and more individuals will struggle to pay their bills. As a result, an expected drop in the stock market should be prepared for.

3. Small businesses suffering

Despite the assistance efforts from various governments around world to help small business stay afloat, many small businesses were forced to reduce staffing or shut down entirely. If we see a continued negative impact on small businesses, we will undoubtably see an increase in unemployment and consequently a bad impact on the economy.

4. Unemployment will last for longer than the crisis itself

In an optimistic scenario, even if things begin to go back to normal it is unlikely that the unemployment issue will be solved quickly, as it will take months for businesses to recover from the no activity and no income as well as all the various other challenges that they recently faced. Those business that didn’t survives will leave a big gap in their sectors, that will be taken over by giant corporations, and the unemployment rates will likely remain very high with major economies feeling the strain for a long while to come.

5. Massive potential Mortgage defaults

Lots of lenders and Banks have been very lenient with their late paying customers as of late, giving many allowances for late payments. However, as hey generous as they have seemed, we all know that Banks will not delay their income forever. That combined with the high unemployment rates and the running tap of central bank stimulus that will soon dry out, we should expect many lending defaults to occur, bringing yet another potential blow to the Stock Markets.

6. Unreliable data

Many investors rely on the Earnings per share (EPS) to estimate, weather a stock is a good buy, sell or a hold. However, with the current stock market being pushed higher artificially by the stimulus packages, the EPS are no longer regarded as an accurate measuring tool, as they no longer reflect the real value of the stock, with as much as half of all EPS estimates taking the economic impact of the crisis into account. In fact, many stocks seem to be cheaper than they actually are, misleading investors into making wrong investment decisions that can lead to disasters.

7. Companies unable to buybacks their own stocks

Stock buybacks, or share repurchases, give companies to re-invest their own money into themselves, which allows the company to absorbs the repurchased shares, reducing the number of outstanding shares on the market. We know this topic is a controversial topic in itself, the fact remains that they make up a large proportion of corporate stock market gains. However, due to the downturn many companies were forced to reduce their stock buy programs.

8. A looming bigger recession

Many Financial experts are expecting a post-crash recession in the US, with little hope of the Federal reserve bailing out the (too big to fail) companies this time round. Therefore, if this recession hits, it will be one of the worst recessions in history.

9. Fear and uncertainty

We all know that influences such as fear and panic can fuel an economic downturn as effectively as other factors. With the current healthcare scare of the virus still largely mysterious to healthcare professionals it is difficult to make informed decisions, especially on investing. Add that to the prevailing uncertainty and confusion in the world we live in today, economic damage and stagnation are very likely outcomes that should be taken into consideration.

10.Trade war concerns

We are not likely going to see the U.S. go back to a China centric model, where multinationals use China as their global manufacturing hub. We can expect lots of new regulations and tariffs to be introduced post the pandemic, in an effort to reduce dependence on other countries for essential goods like antibiotics, medical equipment and supplies. Once the new tariffs get introduced, the U.S. stock market will certainly be impacted negatively.

Written by

Shihab Obiedalla