Corona and shares

Never before has the German leading index lost so much in such a short time. Triggered by the spread of the coronavirus, the DAX fell by 40% at its peak within only 30 days. The crash was fed from two sides: Firstly, by a high level of valuation and carelessness in the run-up and, secondly, by extreme uncertainty about the consequences, as no comparative data are available on the impact of a pandemic on the markets. Today, there is still a great deal of uncertainty about the concrete consequences. There is consensus, however, that the economic „lockdown“ will plunge many countries into recession.

We know from past experience that share prices in a recession usually fall below the book value of the company. In the case of the DAX, this currently stands at around 8,300 units. On March 19, the leading German index had temporarily reached this level, thus pricing in a recession.

In recent weeks, central banks and governments around the world have launched extensive programs to contain the effects of the virus on humans and the economy. In addition, a slowdown in the rate of spread is becoming apparent in various regions.

However, the uncertainties remain high. The large number of unfavorable company announcements and dividend cancellations show how serious the situation is.

When the uncertainty is at its greatest, opportunities may also arise for investors willing to take risks. Enclosed you will therefore find an overview of which stocks have corrected most sharply so far. If the underlying conditions are right, several of these stocks could show signs of recovery in the coming months. However, the business model plays an important role in assessing future developments. Price declines alone are no reason for the price to rise again.

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