If one could tear up two months — February and March — from the calendar of 2020, global stock markets would not know the ravages of Covid-19.

The market crash on Wall Street and much of Europe and Asia that began on Feb 20, 2020 bottomed out on March 31. It was strikingly sudden and reflected the quickest recovery among all financial market crashes. The Dow Jones Industrial Average stood at an all-time high of 29,551 points on Feb 12. But then it tanked, snapping the 11-year bull run.

Financial experts and economists are intrigued not so much by the fact that the markets should have crashed after Dec 31, 2019, when the World Health Organisation (WHO) identified the first case of Covid-19 in China. They are intrigued because they should have bounced back even before March 11, 2020 when the WHO officially declared the coronavirus outbreak a global pandemic.

February 25, 2020 saw the biggest fall in world stock markets. The bewildered investors termed it another Black Friday. Markets across Asia, United States and Europe sank like stones. Nasdaq Composite, FTSC, CAC 40, DAX and IBEX 35 all fell as international oil prices took a dip and gold rose to a seven-year high. The yield on 10-year and 30-year US Treasury securities hit record lows, with the 30-year securities falling below 1pc for the first time in history, according to several studies conducted on the impact of the pandemic on financial markets.

The index tumbled to 27,229 points on March 25, but rose to now stand at 47,000 points, the highest level in three years

Studies show that FTSE, the United Kingdom’s main index, dropped more than 10pc on March 12, 2020, its worst day since 1987. The stock market in Japan plunged more than 20pc from its highest position in December 2019. Countries around the world imposed curbs on industrial activity through lockdowns. Death count from the pandemic soared. The unemployment rate around the world rose to the highest since the Great Depression. There was a general fear of something as bad as the Great Depression. Yet the downturn ended in April 2020 as the US markets began their bull run.

A global market expert noted that the S&P 500’s journey from its record high to a bear market and back to a new record high took just 126 trading days, the fastest-ever pace of increase. In previous downturns going back to 1928, it took an average of more than 1,500 sessions for the index to return to record levels, equivalent to about six years, a study by experts said. The Dow Jones Industrial Average hit a record high of 30,000 on Nov 24, 2020.

In Japan, the Nikkei has jumped to a new 29-year high. What could have encouraged investors to re-enter stocks? The response of most central banks around the world was quick. Financial markets in Europe and Asia have also shown generally a sharp recovery. Brent is at a nine-month high. The safe-haven dollar sank as central banks pumped money into the system and lowered interest rates to trigger consumption.

The major Asian and US stock markets recovered following the announcement of the first batch of vaccine making its way into the system in November. More support is provided by forward earnings expectations of corporates, which are better than earlier expected. Market watchers say that sectors that had taken the major hammering, such as banks and travel and leisure, started to recover. The technology sector prospered from the pandemic.

National Investment Trust’s former chairman Tariq Iqbal Khan said the fear of the unknown that gripped the world at the first sign of the pandemic sent people scurrying to stow away cash, leading to a massive decline in consumer spending. The purchasing power of people was also compromised with the hit on wages and mass unemployment.

But interventions by the central banks to provide cash on low rates and government incentives to boost economies raised confidence in the minds of the public who used online services which gradually restored consumption, leading to the revival of industrial activity. He said that long before its availability, Covid-19 vaccines sparked confidence during the trial.

The Pakistan stock market also saw the benchmark index cross 46,000-point level on Jan 12 on signs of improvement of the economy on the basis of an increase in remittances, stable foreign exchange reserves and currency.

But as Covid-19 came in February, businesses, industries and markets were devastated. The index started to tumble, settling deep down the dungeon at 27,229 points on March 25. From then on, the index catapulted and now stands at 47,000 points, the highest level in three years.

But the worst on the global scene seems far from over as analysts are worried about the possibility of further lockdowns and delays in vaccination programmes. However, a person familiar with the world vaccination planning said that in the United States, the population above the age of 60 had already received the shots and sooner than later a large part of humanity would receive vaccines that could tame the virus.

Muhammad Rameez, head of sales at Foundation Securities, affirmed that central banks played a pivotal role in containing a massive damage. They provided stimulus packages in many countries, including Pakistan. Low interest rates and deferred debt repayments gave industries space to breathe. He conceded that the smart lockdowns in Pakistan kept the wheels of industries turning and prevented further job losses.

Published in Dawn, The Business and Finance Weekly, February 8th, 2021