Uncertainty is rife over US economy, but there is hope
2020 feels like it’s been going on for a decade or so, but in reality, it’s only half over. Global financial markets have been experiencing major ups and downs in recent months, but while the word “crisis” lingers on everyone’s lips, the truth is that there are always winners and losers. Let’s take a closer look at the US economy and see how it faired and where it’s heading to.
Coronavirus and global markets
As the rapid spread of the coronavirus pandemic took health sectors across the world by storm, it has also brought about massive changes to global markets and economies. The FTSE and Dow Jones Industrial Average have seen a large downturn since the start of the pandemic, and this has been exacerbated by business closures and lockdown measures.
The spread of the virus and its far-reaching economic impact remains highly unpredictable. Thus, consumer and market uncertainty are rife across the world, with the resultant volatility creating opportunities in the market. The International Monetary Fund has described the economic decline as the worst since the Great Depression of the 1930s. Adding to the ongoing downturn, trade wars between the US and China have led to negative impacts on both economies, that has in turn led to a decrease in each country’s economic competitiveness.
Outlook for the US
Advanced economies, such as that of the US, are not immune to the effects of the Covid-19 pandemic and have also seen a major downturn. The US, which once topped the list, has now fallen to 10th spot in the world competitiveness rankings.
Federal Reserve Chairman, Jerome Powell, stated that a full US economic recovery would most likely not happen until the country is certain that the coronavirus epidemic is under control. However there are glimpses of hope coming to the forefront.
While the overall outlook for the dollar may be uncertain, there is some cautious optimism at play, as the dollar rose this week from its earlier lows. In fact, with the dollar index recovering from a 3-month low, investors seem to be taking refuge in the dollar over other more unstable investments. Consumer sentiment is also on the rise as the US economy reopens further. The general sentiment is that the US economy seems to be showing signs of recovery, albeit gradual. All in all, it may be a bit early to tell, but could things could be turning around for the US economy?
US economy isn’t all doom and gloom
While the overall market sentiment is negative, and there is a potential recession looming, these factors are certainly not dictating everything in the markets. The pandemic, while having devastating healthcare and economic effects, seems to be creating a new pattern where certain types of business will thrive. Some investments might become increasingly appealing, as the markets shift toward these new patterns.
One such investment is online shopping companies. With online purchases becoming more and more prevalent during the pandemic, online shopping websites are seeing a remarkable increase in business. Therefore, companies like Amazon, are experiencing an unprecedented uptick in stocks. In fact, Amazon has experienced a rise of 41% in stocks for the year to date, and they’re expected to grow even more. General trading sentiment seems to be positive around Amazon’s shares.
Needham analyst Laura Martin expects there to be more gains in the future. She stipulates that Amazon’s subscription businesses (such as Amazon Prime) are growing rapidly. Amazon’s media products have “hidden asset values” and are worth closer to $500 billion, about the same as its cloud business, according to Needham. Each media asset opens the company to a different market, spanning across many different consumer types and creating a better overall picture for the online shopping giant.
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