Friday afternoon in Australia was a return to mid-March last year.
Forgive the Frozen reference, but it was back to “into the unknown”.
It’s a key song used in the children’s film series, which captures the terrible fear one feels when they stare into a situation or a scenario they cannot fathom.
At one point on Friday afternoon, news flashed up about trade terminals across the globe, suggesting that the new strain of COVID-19 found in South Africa may be resistant to the vaccine that has just been rolled out around the world.
It created a sense of panic and some markets on Wall Street went into free fall.
A bitten, twice shy
The World Health Organization (WHO) convened a special meeting to discuss the new COVID-19 variant.
But the comment that struck fear in the hearts of those who moved money was that the variant contained “a large number of mutations”.
Investment market analyst Evan Lucas says they are concerned about global markets, and for good reason.
“There is no doubt that it is a risk,” he says.
What is a business worth?
However, it is a very broad view of the problem.
The reality is that the Australian Securities Exchange comprises hundreds of stocks, all of which have a measurable value.
So when news hits trading terminals across the country, investors need to find out how this information changes the value and thus the price of the shares they own.
It is no surprise then that shares such as Flight Center (-7%), Qantas (-5%) and Corporate Travel Management (-5%) all fell sharply.
In a short time, analysts reintroduced lower future turnover figures for these companies, effectively pricing more travel uncertainty and potential international border closures.
Extraordinary external shock
Here is the second problem.
COVID-19 fatigue is real.
Anyone who has just returned to the office will have had conversations with colleagues about how tough the last 20 months have been.
Many are ready to enjoy a well-deserved break.
More generally, however, governments and central banks were at war in March last year.
Australia’s budget was actually in balance, and the Reserve Bank had room to maneuver to loosen monetary policy – and the belly to engage in money laundering.
That’s a different story now.
The Australian government is now in debt to around $ 860 billion and the Reserve Bank’s cash interest rate is a shadow above zero percent.
Another wave of the pandemic, without an effective vaccine, would be like a devastating bullet swinging into the economy.
Awkward time for another crisis
If that were not enough, one of the biggest threats facing the global economy and financial markets is a rise in inflation, seen most spectacularly in the United States.
It is already pushing up US interest rates, which are also experiencing higher borrowing costs in Australia.
Early Friday, the Commonwealth Bank raised its fixed-rate mortgage products by as much as 0.3 percentage points, its third move in six weeks.
This is another concern for investors.
“Equities remain vulnerable to short-term volatility, where potential triggers are the recovery in coronavirus cases globally and new variants, the inflation scare, smaller pigeon-like central banks, the US debt ceiling and the declining Chinese economy,” said AMP chief economist Shane Oliver. .
Keep calm and carry on?
Much can happen in a single day in the global financial markets.
And the last 20 months have been a hell of a trip.
March panic turned into persistent fear and anxiety, but people are a resilient bunch, and slowly but surely we found solutions.
The world was hit again earlier this year with rising COVID-19 case numbers, but it was different – we had a vaccine.
Now we face the potential of a new rise in cases that we may not yet be able to combat.
If so, scientists will struggle to find new artillery to fight this new tribe.
And while that is happening, investors in global markets, at least in the beginning, are looking for a safe place to protect their money.
It’s a tough time for any investor to hold back the nerves.
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