The global market is now in a free-fall state, thanks to the spread of Coronavirus, the big companies are now in sale. This is a huge opportunity for investors to buy the companies cheaply. However, our health and well-being should be our number one priority as we are all going through this epidemic which will hopefully come under control soon.
As people say, it's always good to see numbers than to hear another rumor, I'll be presenting you with some factual data. I hope you will not get bored with what I'm presenting to you today. As we all know, as soon as the American market starts to fall, the economy of the whole world follows the same path. First of all, let's summarize the condition of the American economy.
Condition of the American Economy:
3.3 Million people have claimed for unemployment as of the 26th of March 2020, which is the highest number ever reported in the history of the USA. This record has surpassed the previous all-time high of 695,000 people claiming to be unemployed as of the 2nd October 1982, by more than 5 times. Every big business is trying to cut off expenses to be as frugal as possible, which naturally leads to the firing of employees.
I'd like to highlight the increasing price of a US dollar as well. $1 can be exchanged for Rs. 120. The American Federal Reserve has issued a relief bill of $2 Trillion to the USA at a 0% interest rate primarily in order to keep the economy of the country floating. This bill is passed primarily so as to focus on the big corporations that have huge long-term debt.
S&P index has fallen by almost 25%. Industries such as Food Chains and Airlines are in an all-time low situation with no sign of profitability in the USA. Since a few companies are too big for the USA to fail, the stimulus package will help keep the finances of such businesses that are giving the yield of a short-term loss in the form of a loan.
A bailout package is expected for the Cruise line companies, however, there is no sign for any help for that industry yet. This is because most of these Cruise lines are not based in the USA although they are operated in the USA. They do not pay the corporate taxes to the American government like the corporations based in the USA.
Out of the allotted $2 Trillion, every eligible American citizen is going to receive a cheque for $1200. The stimulus package calls for a massive cash infusion of $130 Billion Dollars for the Health Industry. $367 Billion Dollars fund is separated for a small business loan program and $500 Billion Dollars for big industries that have been hit hard such as Airlines.
This way, banks have enough money to provide such businesses a loan in order to keep those companies floating. These businesses have a proven business model for profitability that would have worked if the COVID-19 hadn't spread like a plague. So, they will require a loan to keep the company floating in the short-term.
In the long haul, after this global epidemic comes to an end, these companies will be profitable enough to pay back their loans. This way, the banks get their money back with interest and they'll be profitable as well. In this way, the American economy will keep floating and then the economy of the whole world will start to improve.
Condition of the Nepali Economy:
Nepali economy is predicted to fall significantly because of the global COVID-19 pandemic. The economy of Nepal is vastly dependent on the tourism industry and since the whole world is in the lockdown, the tourism industry, as well as the hotel industry, are getting dry. Nepal's economy was projected to 8.5% growth for this year along with Visit Nepal 2020 which seems impossible to achieve.
Construction of Pokhara International Airport, Gautam Buddha International Airport, and Melamchi Drinking Water are vastly affected as there are no Chinese workers. The remittance amount is decreasing as well due to the decreasing foreign employment opportunities. Exports are decreasing and the Nepali stock market is down by 21%.
What are your strategies to survive this global economic downturn? Do you have an investment plan as well? Let us know in the comments section below.