Dangers of second COVID-19 outbreak

The second wave of the coronavirus may effectively kill the global economy. If the virus does come back, markets will collapse, followed by mass bankruptcies that will be very hard to stop.  

“If COVID-19 comes back and major economies shut down in the fall again and countries take protective economic measures, we may expect an over-reaction from markets. We have run out of monetary incentives. We can’t lower interest rates further or pump in large amounts of money (into the economy – ed.) any more,” predicts Andrey Movchan, CEO of the Movchan’s Group investment management company.

The economist believes that another economic shutdown will hit businesses much harder because the economies have already been weakened by the first shutdown.

“Like in 2008, we may witness another drastic market collapse and dramatic changes resulting from bankruptcies and business suspension – on a much larger scale than what we are witnessing now,” Andrey Movchan notes.

He is also warning about delayed effects of the first wave.

“When it comes to bonds, the default effect is always delayed, by 18 to 24 months, and it will affect bond and stock markets even if there is no second wave.”

Oleg Vyugin, professor of the Higher School of Economics and Chairman of the Supervisory Board of the Moscow Exchange, also commented on the matter:

“Nobody can guarantee that there won’t be another lockdown. Markets are mainly relying on a vaccine. But there is a chance that we will have to lock down again and it will result in market correction.”

The economist does not see any other reasons for correction.

“Fundamentally, nothing has happened. None of the major funds in the world have suffered. People are willing to work. Productivity in some sectors is very high. Innovative businesses are developing,” Oleg Vyugin noted.

The economists shared their opinion during the Money in the Big City online television program.

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