As the Covid-19 pandemic continues to wreak havoc on the world’s financial markets, investors are facing some difficult choices. The general feeling is that the number of viable investment options is dwindling and that there are no safe havens for capital. With a vaccine still months away and no other cure in sight, this situation threatens to completely halt global trading routes and commerce.
Back in the spring, we had several massive crashes that rocked the world of finance to its core. The crisis, dubbed the COVID-19 recession, only aggravated already fragile markets. Events like Brexit, China–United States trade war, and Russia–Saudi Arabia oil price war were already straining the balance of global commerce, threatening to plunge the world into another recession on their own. Then Covid-19 appeared and all hope of avoiding a recession was lost. Months later, the situation is still dire, but there are some signs of recovery and investors are looking for opportunities to deploy their money. But before you do, here are some things for your consideration.
Traditional Investment Opportunities Are Still Here
In times of crisis, people instinctively reach out for true and tested cures, like investing in gold. A small percentage of investors, however, took the completely opposite route and tried to find salvation in controversial investments, like cryptocurrencies. While both approaches have their merits, they aren’t our only choices. Some experts argue that fleeing to gold or crypto is unnecessary. They claim that there are plenty of traditional stock options available, but people ignore them due to Covid-19 pandemic. In fact, some of the most valuable companies have their stock value lowered due to the crisis and now represent an excellent investment opportunity. So, before taking a divo into the speculative world of precious metals and crypto coins, take a look at Apple, Coca Cola, and other well-established brands.
Cryptocurrency Market Is Set for A Boom
If you don’t find traditional investment opportunities appealing, then you may want to take a look at crypto markets. In the last decade, crypto coins have gone from purely speculative commodities to legitimate investment vessels. Even the biggest investment funds are holding large positions in various coins. More and more national banks are joining the fray, with either investing in existing or creating new, national cryptocurrencies. One of the recent measures that will have a huge impact on crypto trading was recently passed by the Supreme Court of India. In a landmark decision, they have overturned the Reserve Bank of India’s ban on cryptocurrencies, allowing 1.2 billion Indians to actively engage in trading and mining. This alone will have a massive impact on the markets and how crypto coins are perceived worldwide.
Useful Tools
Many of the tools investors use are ill-suited for the current situation. They simply aren’t designed to deliver correct results in their analysis during one of the worst recessions in human history. Fortunately, some can be relied upon. One of the most important tools for both seasoned and novice investors is Comparable Company Analysis or Comps. Comps uses several different valuations ratios among the companies to determine whether the listed valuation of a company is correct or not. These valuations, called multiples, compare things like Earnings-Per-Share (EPS), EBITDA, or Revenue to Enterprise Value or Market Capitalization. The best thing about Comps is that it is relatively easy to perform and that it, for the most part, uses publicly available data anyone can access. That, in addition to its accuracy, is the main reason for its popularity. It should be a top priority for any aspiring trader.
Forex Is in A Slump
Long touted as one of the most promising market segments, Forex (Foreign Exchange) seems to be entering a slump. Plagued by the trade war between China and the United States, the dollar has taken a sharp dive, prompting many traders to start dumping their positions, which only added to the downward spiral. Only the quick intervention by the Federal Reserve and the announced stimulus package have prevented more serious consequences. But even with those measures in place, it would seem that the era of U.S. exceptionalism is approaching its end. Since the dollar has been a cornerstone of Forex trading, it raises some unpleasant questions about its successor. The Euro is too regulated for speculative trading and China doesn’t have the trust of the international community. This may cause a massive run on all Forex markets, as more and more investors and traders simply abandon it for greener pastures.
Big Players Are Taking Up Positions in Crypto
Back in 2017, Facebook began working on a proposed cryptocurrency planned for use on its network. In 2019, the plans changed and Facebook announced that Libra will be used as a global coin. This attracted many big names to the party, despite somewhat murky plans about the implementation. Fast forward to 2020, when Libra was planned for release, and we still don’t know almost anything about the code. The blockchain network that was supposed to power Libra is still non-existent. The first to pull out was PayPal. The biggest global online payments company has had enough and they announced that they are leaving the Libra project. At first, this news sent ripples throughout the crypto community, fueling fears that PayPal is abandoning crypto altogether. However, that isn’t true. PayPal is actively working with several coins. Abandoning Libra was just a sign that they have lost trust in Facebook and Mark Zuckerberg.
