Stock market crash 2020: Depot wiped out?

After 6 weeks of coronavirus we are now in full blown economic panic that led to the 2020 stock market crash. The crash due to the corona virus marks the beginning of one of the most sudden recessions of all time. The pace of the stock market crash is frantic. Der Spiegel has compiled this in a clear graphic.

Börsencrah 2020: 39 % Kursrückgang in Rekordzeit.
Stock market crash 2020: 39 % price decline in record time. Source: mirror

The speed of the stock market crash has to do with the fact that the pandemic was spreading far further and faster than most ever thought it would. The whole world is now in some form of lockdown. A phenomenon that we have all never experienced in the modern world.

So what should we do in the 2020 stock market crash?

Before we clarify this question, let us first consider the financial as well as humanitarian effects of the corona virus and the resulting stock market crash.

Financial aspects of the 2020 stock market crash

On the financial side, fortunes were lost 35 – 40 % diminished by the 2020 stock market crash. Crash prophets are getting more and more popular. If you predict the crash every year, you're bound to be right at some point, right?

Worse, some people try to time stock prices. This allows you to sell your investment at a discount to protect it from further depreciation and then buy it back at an even lower price. They assume they are smarter than everyone else and can predict a construct as complex as the stock market. Investing is so easy when you following rules also take to heart in the 2020 stock market crash (and also before and after!).

Humanitarian aspects of the crisis

We should not forget that human lives are at stake. Over 70,000 people have already died from Covid 19. It can be assumed that there will be significantly more deaths due to the exponential growth of the corona virus. Our Health Minister Spahn therefore still speaks of "the calm before the storm". What is still to come can be found in the best and worst case considerations further down in this article. Here you can find the daily updated COVID 19 case numbers:

[cvct country-code=”DE” style=”style-2″ title=”Germany Covid19 Cases Update” label-total=”Total” label-deaths=”Died” label-recovered=”Healed” label-active=” Active" label-recovered-per="Healed %" label-death-per="Dead %" bg-color="#96c7e5″ font-color="#fff"]

Terrible, isn't it?

It is understandable that many people are anxious. Your assessment is correspondingly pessimistic. I remain bullish on the 2020 stock market crash. I am convinced that we will emerge from this crisis smarter and stronger. It was like that in 1987, 2000, 2008 and it will be like that in 2020. Therefore also The best passive investment strategies still work. The only difference: Today you get a discount when entering!

The world will keep turning. All countries are doing their best to slow down the infection. The RKI reports great successes here in Germany. The average infection rate is now only one person instead of 2-3 people as at the beginning of the pandemic. That means the exponential growth is broken. In addition, people will continue to help each other. Most people will stay home and heal with no sequelae. Hospital beds and ventilators are being added every day, nurses and doctors are doing their best to save as many lives as possible. Many office workers will continue to work remotely and do their jobs.

There is hope…

Zudem arbeiten auch in der Krise Firmen weiter an Innovationen. Viele Leute bleiben lange wach und arbeiten in Labors an Impfstoffen und deren Tests. Seit Anfang April 2020 werden bereits erste testing on humans carried out, which corresponds to the fourth phase of the six-phase vaccine development. Many experts are currently assuming that a vaccination could be available in early 2021. The manufacturer CureVac is even talking about the end of 2020. That would defeat the virus.

But apart from coronavirus research, there are many more things in the pipelines of scientists and engineers from all disciplines. They just don't make the headlines right now. Things are still being invented that will continue to improve the future. Better and cheaper batteries are constantly being developed in order to advance the mobility revolution and displace fossil fuels. 

Even in the stock market crash of 2020, research does not stand still. An example: battery cell research causes prices to fall due to progress. Source: Statistics.
Even in the stock market crash of 2020, research does not stand still. An example: battery cell research causes prices to fall due to progress. Source: Statistics.

Fueled by working from home, Internet connections are becoming better and better and cheaper. Universities are now increasingly having to hold their classes online, thereby creating important prerequisites for location-independent learning in the future. These are all great things that we will benefit from post-pandemic.

How good are the prospects really?

People are afraid and act in panic. It makes sense, because the western world has been familiar with previous pandemics from the news. Now that the pandemic is on our doorstep, many are scared. Grocery stores are partially cleared as people settle in at home. On the streets you see people with masks and when jogging, people voluntarily avoid you so as not to be breathed on.

It is important in this situation to understand the big picture of what is actually going on. The world is not about to end.

In fact, we imposed on ourselves the harsh measures that led to the economic downturn. Clever people decided that in order to be able to save the lives of many people. I think that is a great achievement of our civil society.

In order to be able to better assess the danger posed by the corona virus, we draw up a best-case and a worst-case scenario. In the end, the truth probably lies somewhere between these two scenarios. Incidentally, the scenarios are based on the strategy paper of the Federal Ministry of the Interior, which forecasts how the federal government will deal with the corona pandemic.

COVID 19 worst case scenario

When push comes to shove, only complete contamination of society will stop the virus. Experts always assume that 70 percent of people must be infected and immune to stop further spread. If around 2 of these 70 % infected people die (here, too, the estimates vary widely), around 1.17 million people will die of the coronavirus COVID-19 in Germany. That would be the worst case imaginable.

adoptionnumber of dead
Population of Germany82.80 million
70 % of the population infected57.96 million
2.02 % of those infected die1.17 million
COVID 19 worst case scenario: Over 1 million dead in Germany

Now the best case of the COVID-19 deaths

If it were possible to make the corona cases harmless for society through extensive testing and targeted isolation, the effects on deaths and the economy would be minimal. This scenario will also Hammer and Dance called and represents what we can achieve with maximum effort. Mortality is only 1.2 percent due to sufficient intensive care beds and ventilators. In addition, the scenario lasts only about 2 months. Since the population is not immune to the virus, protective measures are still necessary.

adoptionnumber of dead
Population of Germany82.80 million
1 % of the population infected0.83 million
1.2 % of those infected die0.1 million
COVID 19 best case consideration: We do everything we can

If I hadn't read the strategy paper, I would have been even more optimistic.

Significant uncertainties

In the worst case, we have no chance of containing the virus because we don't recognize the danger and downplay it. Therefore, we would continue to work and travel, thus spreading the virus freely. We would simply let the disease spread to protect the economy. I think that's very unlikely. Also the Data so far do not speak for it.

The whole thing would be a terrible scenario, but there are many terrible scenarios in the world. We have simply gotten used to most of them and simply ignore them in our everyday lives.

In order to be able to better classify the corona deaths, the following two graphics show the types of death in Germany in 2017. In total, almost a million people died in 2017. In the worst case, twice as many people would die for a year before everyone is immune. But I think we'll be able to do that much better.

Im Jahr 2017 verstarben in Deutschland insgesamt 932 272 Menschen. Die häufigste Todesursache im Jahr 2017 war, wie schon in den Vorjahren, eine Herz-/Kreislauferkrankung. 37,0 % aller Sterbefälle waren darauf zurückzuführen. Quelle: Statistisches Bundesamt
In 2017, a total of 932,272 people died in Germany. As in previous years, the most common cause of death in 2017 was cardiovascular disease. 37.0 % of all deaths were due to it. Source: Federal Statistical Office
Häufigste Todesursachen in  Deutschland zum Vergleich
Most common causes of death in Germany for comparison. Source: Federal Statistical Office

In the 2020 stock market crash, some good things are happening as a byproduct

  • We drive around less and pollute a lot less. The air is drastically cleaner everywhere. This is on satellite images of the ESA clearly visible (left March 2019 vs. 14-25 March 2020 in the right picture)
Also an effect of the 2020 stock market crash: NO2 concentration in France is falling because far fewer people and goods are moving around. Left March 2019 Right:. 14-25 March 2020. Source: ESA
Also an effect of the 2020 stock market crash: NO2 concentration in France is falling because far fewer people and goods are moving around. Left March 2019 Right:. 14-25 March 2020. Source: ESA
  • We practice humility. After the crisis, it will be a pleasure to go on vacation abroad or to be able to go to concerts and cinemas again
  • People walk and jog a lot more. This can be clearly seen in my city!
  • We can have experience of a pandemic where only about 2 to 3 percent of people die. Luckily we were spared something more serious.
  • We can use the time for our Children now cheap to save a depotso that they can be secured later.

How will the 2020 stock market crash affect my portfolio?

Once you have internalized the really big picture, you can see that sooner or later we will get through this crisis.

As in past recessions, weaker companies will go bankrupt. Strong companies will have the strength to get through this crisis and reward people who stand by you with good dividends. When the whole mess has been settled, small new companies will appear on the market and create new ones out of the fragments of the old ones. It is possible that society will also treat hospital staff and supermarket workers better in the future through their tireless work to take care of us all during the crisis.

The motor of the corona crisis will also open up new possibilities in the future for the treatment of diseases. A huge field test for telemedicine is currently underway worldwide, so that the solution developed here will be available to the elderly and sick in the future. Home office and location-independent learning is currently being extensively tested. We can use the knowledge gained from this in the future, along with a thousand other things that other people and companies will still think about.

The result will be a more stable and prosperous world. Sooner or later, this additional profit will also be reflected in the depots found by numerous investors. In addition, we then created a more livable environment.

Of course, we could have done all of this without the corona crisis. Unfortunately, we only have the ability to become comfortable when there is no need. So there is more truth to the hackneyed saying that necessity is the mother of all inventions than we might want to admit.

one further amendment

With this article I assume that Blog parade by Jürgen from the ETF blog on the topic of "Private wealth creation in Corona times". You can find articles by other authors in under the link on Jürgen's ETF blog.

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