The world has been shaken by the waves of Covid-19 pandemic and despite the immunization program being carried out at a frantic pace, the fear of relapse does lurk on the horizon.
With initial outbreak bringing the entire world to a standstill, commerce was affected severely. The partial to complete unlock which was done based on flattening of the curve(number of cases/day), did see some acceleration in economic activities but the process was short lived owing to virus mutation.
The mutation cycle may soon turn to be norm till herd immunity catches up. Companies world over have used a mix of different approaches to tide with the disruption namely unofficial hiring freeze has been enforced, workforce has been trimmed and there is cutback on spending & capital expenditure(capex) plans.
As many of the companies are listed on Domestic and Overseas Stock Market, we will have to look at the bigger picture for the year 2021 by asking an intriguing question:
How will companies sustain growth?
We list down some factors that can either accelerate growth(rise in the stock market) or keep the growth stagnant(fall in the stock market). The factors are as follows:
Covid-19 Control: Immunization and Spending on health care sector
Bond Yields: Access to low-cost debt essential for companies aiming to recover from the Covid-19 linked disruption
Crude Oil Prices: Despite the thrust on Clean Energy, the dependency on Fossil Fuels is going nowhere in the short term and any disruptions in the supply chain or cutback from OPEC will lead to slide of economies world over
Corporate Earnings: Results from companies in different sectors listed on the Stock Exchanges like NASDAQ, FTSE, NSE, BSE, NYSE, LSE, SGX etc. will bring clarity on recovery
Exports: Commerce i.e. Goods Movement will be essential for recovery
Government Spending: Efficacy of the spending and its outcome will be crucial for recovery
Impediments on the above factors can lead to a crash & loss of valuable investor wealth in the calendar year.
Kindly keep an eye on the above factors before investing your money in the markets. This can decide how & when your money can bring rich capital gains and dividends