Could this be the start of the second COVID-19 share market crash?
The S&P/ASX 200 Index (ASX: XJO) fell 3% yesterday and it’s expected to fall another 3% at the open. Who knows where it will finish by the end of today?
A second wave of COVID-19 was always a risk to the share market recovery. Countries like Australia, New Zealand, Taiwan and Vietnam have done a good job at controlling the spread of the virus. The north east of the US took the brunt of the initial wave. Now a lot of other US states are seeing rising numbers.
We’ve already seen that many places in the US can’t uniformly follow restriction rules, so this second wave could be harder to control. Although, the first wave didn’t really end.
Is this the second COVID-19 share market crash?
It certainly could be. A second wave was one of the key reasons that could start another share market fall. I don’t think the market was pricing in the high chance of a second wave. So if you’ve been saving your cash for another COVID-19 share market crash, this period is probably your chance.
But there’s a fair chance that this fall won’t be as bad as the first for a few reasons.
First, all of the central bank support is still there. Interest rates are still incredibly low in Australia, the US and Europe. It was seemingly the central banks stepping in that halted the crash in March.
Second, the US may be bad at controlling COVID-19 but many other places have gotten on top of it. Europe was in bad shape, but now daily case numbers are a lot lower. Several important countries in Asia are in control. We’re not looking at every developed country being in trouble.
Third, people will expect a recovery. The first COVID-19 share market crash was only three months ago. There’s a good chance that once the market stops falling it will recover nicely again as people see value in lower prices.
Foolish takeaway
I’m going to be scanning the market today and next week to see if I can find any great opportunities. Be greedy when others are fearful. A 6% fall over 24 hours would certainly suggest that a COVID-19 share market crash may be starting. But it may be quicker and not as bad as the first.
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More reading
- Woolworths facing fresh threat from Amazon.com
- Is this why the NAB share price could be cheap today?
- ASX 200 to sink lower after Wall Street crashes on second wave concerns
- 5 things to watch on the ASX 200 on Friday
- ASX 200 drops 3%, Webjet share price sinks
Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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