The coronavirus pandemic has made its adjustments to the stock market. The largest Swiss banking conglomerate Credit Suisse, according to research by Kommersant newspaper, has found that the annual rate of decline in the world economy due to coronavirus by 2020 should reach 2.2-2.4%. The economies of different countries will slow unevenly. Thus, in the U.S. it is planned to reduce economic growth by 0.1 percentage points, and in a number of European countries – by 0.4 percentage points.
The ups and downs of the Russian stock market
Negative trends in the economy directly affect the global stock market. Between January and April 2020, 9 out of 10 indices fell by at least 1.5%. In Russia, the situation was even more tragic: on average, during this period, the majority of Russian quotations fell by 10% or more.
If in 2019 the Russian ruble, compared to other world currencies, strengthened the most against the dollar, in 2020 the situation changed. The fall of the ruble began on January 1, and after 20 days the Russian currency, on average, fell by 35%. Russian electronic platform RTS lost about 20 p.p., and the American stock market – by 35 p.p.
Lower than all: which industries are in the “minus”?
The total performance of the Russian stock market has decreased by 20.5% since the beginning of 2020. However, not all industries had a catastrophic drop in quotations. According to Forbes research, in the technological sphere, the drop in quotations was at the level of 9.8%; in the utility sector – 12.6%; telecommunications services were hit by 13.6 per cent; shares in the commodity industry slid 14.9 percent and consumer services fell 18.6 percent.
Finance, industry and oil and gas sector were among the top 3 sectors of the Russian stock market, which suffered the strongest impact due to COVID-19. Thus, the financial industry’s performance has fallen by 24.2% since the beginning of 2020; the fall in the quotations of the industrial sector over the same period amounted to, on average, 0.6%. Indices of the oil and gas industry have taken the main blow: the drop in quotations in this area of RTS was 34.0%.
Coronavirus vs. Oil
The rapid and large-scale drop in quotations in the oil and gas industry in 2020 is not only related to the coronavirus. In the first half of March, OPEC countries planned deals to reduce oil production by 1.5 million. barrels daily. But the deal was not to take place. Russia and Saudi Arabia could not agree: the new deal was not signed, and the old agreement was broken. As a result, oil and gas prices immediately “collapsed” by 20%.
The coronavirus pandemic only spurred the market to fall and, as a result, forced oil-producing countries to take decisive action to conquer the market. Arab countries, including Saudi Arabia, Iraq and Kuwait, offered oil for export at a price of $25 per barrel. By the standards of March 2020, such indicators were considered to be extremely favorable, as the average price per barrel in that period was 32 dollars.
Oil in Russia: then and now
The fall of the stock market and global economic indicators in mid-2020 has a mild effect on the Russian economy. The long-term economy in isolation mode has created a “financial core”: Russia has increased a comfortable amount of financial reserves, which are enough to overcome the pandemic without economic collapse.
But, according to the forecasts of the country’s leading economists, the recession will gradually overtake the Russian economy. According to the Research of the Central Bank, a slow decline in economic growth could have been avoided. But to do this during the pandemic, Russia had to sell oil at a price of $40 per barrel. But that didn’t happen. The oil industry suffered the most: production figures were reduced only on the second attempt, and investors’ interest in the industry fell to almost zero.
The fall was due to the general collapse of the stock market and the economy, as well as the gradual “zeroing” of price tags for raw materials in the oil and gas industry. In April 2020, the oil of the benchmark English grade Brent was recorded: for the first time since 1999, the quote fell below $16.
Russian Urals oil, which is second in quality to the English “middle man”, has also decreased. In April 2020, Urals broke the record of the 21st century: according to RBC, on April 1, 2020, the price of Russian oil was only 10.54 dollars. Over the next two months, Urals watched the entire world market: the price of Russian oil fell to $11.59, then “rise” to 16 dollars per barrel.
Investors at a crossroads: where to invest cash?
The oil industry in Russia is considered the most profitable, but also the most risky area of investment. In 2020, those who invested their shares in Gazprom or Norilsk Nickel lost at least 30% of their income. But there are investors who have managed to increase their savings.
In 2020, due to the coronavirus pandemic, the world economy and stock market have experienced ups and downs every now and then. The ruble, which strengthened against the dollar in 2019, fell again in January 2020.
The dollar was also unstable, which is not the case with the market for valuable currencies. In June-early July 2020, the gold rate increased by 17%. Since May 11, there has also been a steady growth of silver: from 35.80 rubles per gram in May (minimum) it rose to 52.16 rubles in July (maximum).
The market for valuable currencies is one of the priority areas where to invest in 2021. In addition to gold, silver and other metals, investors should pay attention to the rapidly gaining profits of the industry:
- online trading. In 2020, restaurants, workshops and retail stores were able to “stay afloat”, which switched to delivering their goods and services online;
- Medicine. In an attempt to protect themselves from coronavirus, customers of pharmacies actively bought up any drugs and dietary supplements that promote immunity;
- textile industry. The shortage of masks has triggered an unprecedented increase in profits at companies producing protective clothing;
- chemistry. The market of cosmetology has suffered a loss. However, the companies that produced antibacterial products were “in the positive.”
In general, the most promising for investment in 2021 will be any industry associated with online trading and “long-term assets” in the form of precious metals. It is better to refrain from investing money in high-yield and risky assets, such as oil or bitcoin.
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