Avatrade Detail Some Solutions to Market Turmoil

The Coronavirus has caused huge downturns for all trading markets and the situation is looking bleak. However, in their latest special report, Avatrade has detailed some ways that the market could recover and potentially become normal again.

This latest special report from the exchange platform, “What Could Make The Markets Go Normal?” follows on from another last week that provided evidence that a bear market was upon us. As they pointed out during this previous report, some metrics are indicating poor market behaviour not witnessed since as far as the 80s and surpasses that of the crash in 2008.

In this new report, however, they have signalled that markets could go back to normal if the right steps are taken by financial authorities and governments. It is these organisations that, in Avatrade’s opinion, have caused the dire market situation. With the platform explaining that “failing to address this issue at the very beginning has caused this pandemic.” The platform has outlined a total of 5 steps that can be taken by these powers as a means to combat the situation.

The first step they have outlined is for central banks to stop providing interest rate cuts. Just last week, the Bank of England did exactly this, following the example of the US equivalent who had done it a week prior. In both instances, it did more harm than good to the market. The Fed then cut interest rates again yesterday but this spurred no rally either. As such, this measure should be brought to an end, says Avatrade, who wrote, “the bottom line is that central banks have done enough, and now, they should be only utilizing their tone to assure the markets of their support”

The second step that they have said needs to be taken is for authorities to ease the fears business owners have of liquidity. As many small businesses do not have enough capital to survive an extended period of closure – which many have been forced into these measures- they could shut down. This would then heap pressure on banks. This could lead to a bank collapse and then the market would really be in trouble as a domino effect would be created. To stop this self-perpetuating issue, Avatrade advises that “special entities” should be set-up from financial bodies to protect these businesses and offer lines of credit to sustain them through the crisis.

Thirdly, AvaTrade have targeted politicians who they say need to work together, in the same way as central banks, and create a Cohesive Fiscal Response. They have called for politicians to “deliver on a fiscal front”. They would recommend delaying mortgage payments, suspending utility bills and cutting tax and business rates during the duration that employees must stay at home and business must close their doors. These steps have already been taken by some governments, such as in France and Spain.

They have also noted the need for better economic numbers. While this may seem like common sense, the fact remains that even a small amount of green on the market might encourage some investors to back the market again. Much like how the initial downturn spurred further drops,  slight upturn could spark a chain reaction. Avatrade said that just one positive reading in the US or, more likely, China who are now coming out of the crisis, could be enough to begin remedying the market.

The final point that Avatrade has noted is the need for the virus itself to slow down. As long as the number of infected grows at fast rates, the situation won’t improve. The need for further quarantine and isolation is pertinent to this as the slowing down of the spread is crucial to market recovery. The reckless actions of the UK have so far not helped this but with a U-turn announced yesterday in government policy, there may be hope yet.

There are some assets that are so far showing resilience to the market, such as precious metals, and market leaders like Amazon, Google and Microsoft which also pay dividends are looking like the best place to invest currently, Avatrade explained.

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