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Opportunities in the eye of a great depression

Close to a century ago, the Great Depression occurred and the global economy was in a slump. There are glaring similarities of characteristics of the Great Depression that are occurring currently. However, by learning the lessons of the Great Depression and comparing them with the COVID-19 stock market crash, we can discover investment opportunities that will present themselves in the near future.

The Great Depression was the worst economic downturn in the history of the industrialised world, lasting from the stock market crash of 1929 to 1939. It began after the stock market crash of October 1929, which sent Wall Street into a panic and wiped out millions of investors. Over several years, consumer spending and investment dropped, causing steep declines in industrial output and employment as failing companies laid off workers. By 1933, when the Great Depression reached its lowest point, some 15 million Americans were unemployed and nearly half the country’s banks had failed.

Former White House economist in the Clinton Administration Treasury Department Nouriel Roubini commented recently that the shock to the global economy from COVID-19 has been both faster and more severe than the 2008 global financial crisis (GFC) and even the Great Depression. In those two previous episodes, stock markets collapsed by 50% or more, credit markets froze up, massive bankruptcies followed, unemployment rates soared above 10%, and GDP contracted at an annualised rate of 10% or more. However, these events took around three years to develop.

In recent days, markets have been affected by very high volatility and plummeting consumer demand. The global coronavirus pandemic continues to increase substantially from its epicentre in Europe and the United States of America, with more countries imposing severe restrictions that are causing very significant economic damage.

The damage is already evident. Nouriel commented that it took just 15 days in early March for the US stock market to plummet into bear territory (a 20% decline from its peak). With public events getting cancelled and people being encouraged to avoid crowds, the travel and tourism industries are seeing a steep drop in demand. Manufacturers connected to global supply chains are experiencing severe disruptions. Some companies are already facing a cash crunch, forcing them to scale back operations and lay off employees. The stress is especially great on micro, small, and medium-size enterprises, which often have less capital for their day-to-day operations than bigger companies, and are therefore highly vulnerable to global shocks. The OECD projects that global growth this year will be slower than expected, even if the outbreak is contained, and that world output may contract in the first quarter.

TLC, together with its pool of investor funds, is able to use its resources to grow the wealth of its investors. Emerging bargains, as a result of crashing government bonds, credit, stocks, and commodities, are presenting investment opportunities for investors. This is the time when there are plentiful investment opportunities for investors to invest and grow their wealth. We track developments in global financial markets to ensure we can achieve good financial returns on our clients’ investments. We are committed to creating opportunities for you to obtain great profits. Let’s make our investments generate more returns. Now is the best time to invest for a brighter future. We can make it happen! Prepare for better times, by letting us, TLC, to become your partner that can guide your financial decisions in years to come.


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