Recently, the International Monetary Fund (IMF), which is a very systematically important financial institution, has warned that investors should prepare for economic collapse. This is because the global economy will not recover any time soon from the impact of this outbreak. The financial markets will be very volatile before the global economy stabilizes and this is not good for investors even if the market is making gains. What we have might end up being a short term rise of the markets and it might be a matter of time before the market crashes again.
The International Monetary Fund has never been bearish to this extent for very many years. While the big players in the market are bearish, this is the point at which most retail investors are bullish and they hope that the market will continue rising. They are actually bashing investors like Warren Buffett for selling the airlines stocks. Instead of taking this as caution, they are busy celebrating that it is very easy to pick stocks. This usually how any bubble feels at the end; newbie investors always feel invisible while the experienced investors seat by the sidelines.
The entire market and the global economic outlook looks bearish especially considering the fact that we have new clusters of outbreaks all over and this means that the process of opening the economy will be delayed further. It will not be a surprise if the restrictions will continue to be in place until the end of the year. This has a very high chance of happening and if it happens, there will be an obvious historic market selloff and most stocks will plummet to lows we have never seen before. Economically, we are at a bad point and the mainstream media is only reporting half of the story. The global economy has a long way to go before we fully recover from the impact of this outbreak. What we have in front of us is the biggest economic slowdown in history just like the International Monetary Fund has warned.
The United States has already injected trillions of dollars into the economy as a way of helping the economy recovery from this crisis but this has not helped a lot. Still, we will have a very poor economic performance by the end of the year. Very soon we might see the stock market crash again because what we have at the moment is just an inflated market that is being pushed higher every passing day by the Federal Reserve that has been continuously injecting trillions of dollars into the markets. The future of the global economy is very uncertain and with the beginning of the second wave of the outbreak, this is a tipping point because the economic situation might worsen further just like the IMF has warned.
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