INVESTORS DURING AND AFTER COVID-19
Mtem Dooyum Stephenie ACA
Finance and Tax Analyst
Abuja
The world has continued to grapple with the fallout from the Coronavirus Pandemic, with total cases exceeding 25 million and deaths above 800,000 people. On the positive side, the number of people recovered now exceeds the number of active cases. The US remains the most affected country, with more than 6 million cases. Nigeria as at the time of this article has over 55,000 cases with over 41,000 recoveries. Economic forecasts call for a deep pullback in the global economy this year as businesses are swallowed up and GDP in countries around the world have continued to witness downtown.
Experience has shown that the global market be it oil, non-oil or stock are operating on a snail move. Hope, fear, rumors, half-truths and the imperfect powers of predicting the future, in this case, are amplified by the unfamiliar terrain of a global pandemic. The markets have faced worse setbacks and bigger fluctuations and will probably continue to face them if the curve of the pandemic should rise again.
The Forecast
According to Central Bank of Nigeria 274th Monetary Policy Committee Communique issued as at 20th of July, 2020, global output growth has weakened further, as a result of the persistent headwinds from the COVID-19 pandemic. These headwinds comprised: persisting decline in global aggregate demand and supply; disruptions in global supply chain and trade; rising sovereign and corporate debts; heightened financial market vulnerabilities; low prices of crude oil and other commodities; and rising unemployment.
Similarly, there is the other dimension of the conflict within the northern region which has shown a thick blood line in the region of the Central Bank of Nigeria which forecasts a cautious optimism that the global growth contraction would reverse to positive growth path by 2021, as the pandemic is contained, potential treatment found, and restrictions on business activities are lifted by most economies. This development may create a sense of relief in the mind of intending investors who may want to throw in for a big catch.
Before you Invest
Investments like stock, trading in commodities (especially agricultural commodities) and export or import involves some understanding of what company products represent; the target markets they serve and what they need right now, the general churn of economic forces, the study of price trends and patterns, and the ability to read complicated spreadsheets perhaps generally the cash flow in order to make investment decisions. But even if an investor carefully distills this information, one may be still bet against the market, with the assumption that the market is currently valuing or undervaluing the intending investment product and its potential to increase in value or devalue over time. The Coronavirus Pandemic does not change those economic rules rather it has just added complexity to an investor’s speculations. Therefore, the virus has brought a new normal that investors must also watch for and ensure to do their due diligence properly before committing funds to any investment.
Investor’s watch out
Emotion is a powerful driver for individual investors. They need to strip themselves of the emotions that can lead to bad investment decisions. Investors may be particularly vulnerable during the COVID-19 and post COVID eras as many intending investors may face economic uncertainty and concerns about future returns on investments. Therefore investors must watch out and try to set realistic rules, strategies and goals with an eagle vision for their investment and stick to them, even when feelings change. Also, investors should spend more time on due diligence before committing to investment deals.
Finally, we believe the market is reacting to several “new normal” like digitization and assumptions. First, investors are looking beyond this year, believing the crisis is approaching its end with vaccines expected to be ready by the end of 2020. Most Investors expect normalization in 2021 and believe that the world is now able to handle the virus better. Investors must equip themselves with new skills, technology, necessary investment information and adoption of new marketing strategies so as to position properly for the 2021 year ahead. More so, they must have investment strategy that makes sense. Keeping sight of your personal goals and managing your emotions is vital when the markets are in crisis as this is the case now. According to an Economist, Benjamin Graham, mentor of the famous investor Warren Buffet, “we are often our own biggest enemy, when it comes to investing.”
