Stock Market Recovery

The stock market is recovering from virus pandemics

Capital markets have been mainly in terms of internationalization. Money is easy to move and goes where you expect the highest return. This means that the world's stock exchanges are becoming increasingly interconnected. The US Stock Exchange holds a special position through the US influence on the world economy. Therefore, the development of the Swedish stock exchange is largely determined by what happens in New York.

Corona pandemic means that all financial assessments are currently characterized by great uncertainty. No one can say for sure how long or deep the decline will be, but a common feature of the forecasts published so far is that they point to a steep fall during Q2 and also into Q3 this year.

The Corona pandemic has caused the world economy to suffer from a demand shock and a supply shock at the same time. Demand has fallen both because of the restrictions imposed by states and because people have changed their behaviour, for example by postponing larger purchases and reducing their consumption in general. Besides, companies often choose to postpone investments in this uncertain situation, which also reduces demand.
Supply disruptions have also occurred in the supply side. Closed borders, high sickness rates and quarantine staff have led to reduced international trade and a reduced supply of labour. It has become more difficult for the industry to import inputs, which has created bottlenecks and stopped production.

The combined supply and demand shocks mean that GDP is expected to fall steeply in the coming months. The forecasts published so far show relatively large spread - a reflection of the uncertain situation - but in common they expect a decline this year (first half) and then, relatively soon, the beginning of recovery at the end of 2020 and next year. However, the decline this year seems to be so deep that the recovery to a more normal business cycle will take several years. All in all, this means that we are now facing a very deep recession. This is due to a high unemployment rate but with a recovery in the latter part of 2020.

The stock exchange in Sweden

The pandemic beats the entire world economy. Sweden is an export-dependent country and a future recovery in Sweden is thus not only dependent on how the spread of infection develops within the country but also internationally. We can draw comparisons with the swine flu outbreak in Mexico in 2009 and that hit an entire world.

The month before the Sars outbreak in 2002, which was also a variant of Coronavirus, the Stockholm Stock Exchange had gone up ten per cent. In the coming week, investors were still not rescued by the virus. In fact, after a month, the stock market had only gone down 2 per cent. The real downturn came only later. After three months, the WHO had issued a global alert, thus issuing a global health emergency. The stock market was down 11 per cent since the outbreak and was still at minus 4 per cent after six months. The outbreak caused about 8,000 cases, of which more than 750 people died, according to the Swedish Public Health Authority. Today, there are over 2,000 dead (Population of 10 million) and mainly older people. By looking at Sweden, one can conclude what can happen when countries release their quarantines and spread the infection again. More dead but no extreme numbers and a disease picture of 3-4 weeks or not at all for 80% of those who get the virus.

In the spring of 2009, news spread that 60 people in Mexico City had died from what was described as a mutated form of swine flu. The month before, the stock market had risen 16 per cent, and here too the upturn came. After a month, the stock exchange was unchanged after first baking something. Although the virus overall caused many deaths, the fear diminished as it spread. The market had therefore recovered and was up 13 per cent three months after the outbreak. By then, WHO had issued a global alert. The number of deaths is estimated at approximately 285,000 people. The new Coronavirus was discovered just before the New Year. In this case, too, it was a positive trend on the stock exchange before the outbreak. The month before, the stock exchange had risen 2 per cent. Even though the stock exchange has made a downward indication that the virus continues to double its spread every other day, we can note that the stock exchange still stands reasonably well since the outbreak became known. It has come to light that the virus began to spread far earlier, but it is the moment when it became widely known that is the important thing here.

Jan Rejdnell ¹

There is thus a lot of evidence that after the summer months of June-July the stock exchange can start coming back again with vigour. A company that is now taking note of a well-documented valuation can look forward to being included in a general rise in prices on the international stock exchanges, and especially the development of the American stock exchanges. The United States cannot keep the country "closed" for an extended period for the creator of gigantic unemployment and recession that harvests more lives than today's Coronavirus.

Jan Rejdnell

ABOUT C2 CAPITAL

We support management teams on going public to attract investors and to attract better management.

At C2 Capital, we provide companies that have reached a certain stage of maturity the opportunity to go public at the leading European Small Cap market. We have successfully raised capital and listed numerous companies with our partners in Europe, and have a broad range of contacts with the financial markets. Through our unique position we will help raise capital for your company on the open market through our investor and road show programmes.

Brilliant ideas demand great execution. Our people have world-class professional backgrounds. We can facilitate smooth due diligence proceedings, coordinate contract construction and negotiate optimal terms. We take on only a select number of clients at a given time and devote senior-level attention to every deal.