Stock collapse

Consumer sentiment is still close to the level of post-recession, but it will not remain so if the coronavirus spreads to the United States or closes large areas of the global economy. Only time will tell how bad the situation will be. Consumers, however, are paying much more attention to the potential threat, and the huge drop in the stock market has woken Wall Street, if not Washington.

According to the University of Michigan, the final reading of the consumer sentiment index in February rose to 101.0 from a preliminary reading of 100.9. That’s just a few points below the post-recession high.

The survey results include answers from the last two weeks of February, but the threat that the virus poses to the economy has cleared up only in the last days of the month, especially after the stock market crashed.

The consumer sentiment is still close to the level of post-recession, but it will not remain so if the coronavirus spreads to the United States or closes large areas of the global economy. Only time will tell how bad the situation will be. Consumers, however, are paying more attention to the potential threat, and the huge drop in the stock market has woken Wall Street, if not Washington.

“If the virus spreads in US communities, consumers are likely to limit their presence in stores, theaters, restaurants, sporting events, air travel, and the like,” said Jim Curtin, chief economist of the Michigan confidence survey.

In the bigger frame, the consumers were rather optimistic about the economy and their own financial well-being before the advent of coronavirus. If the outbreak stops, the economy is likely to not suffer much.

However, if the situation worsens, it can undermine the confidence of business and consumers, and the economy as a whole, or worst, cause a recession. At the moment, most forecasters predict a short-term blow to the economy, which will eventually disappear when the virus gets under control.

There is no doubt that coronavirus will have a stronger effect on the reaction at the beginning of the month of March, and therefore the confidence index will decrease.

The yield on 10-year Treasury bonds of -7.38%, fell to another record low of 1.19%, as investors sought to secure government bonds. Extremely low interest rates may prompt some consumers to buy or refinance homes or buy new cars.

Since the Dow Jones index is a clear indicator of the industry, after the financial crisis amid concerns about the spread of the coronavirus COVID-19, its reaction was in the direction of bears up to 2.54%. And many of the companies that make up the Dow Jones Industrial Average are preparing for a potential disruption in the workplace, which suggests that instability is expected in the economy.

The material has been provided by InstaForex Company – www.instaforex.com

Source:: Stock collapse