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A prolonged COVID-19 pandemic could lead to a sharp correction in the stock market, IMF warns

A prolonged COVID-19 pandemic could lead to a sharp correction in the stock market, IMF warns

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  • Should the COVID-19 pandemic continue for longer than expected, the economic consequences will likely lead to a sharp correction in global stocks, the IMF warned on Tuesday.
  • Extraordinary policy measures from governments around the world helped stem the decline in stocks since the initial February decline, but underlying economic conditions remain weak and the future outlook is highly uncertain, the IMF said. 
  • Investor worry over a potential prolonged COVID-19 pandemic could have been heightened on Tuesday after Johnson & Johnson paused its phase III vaccine trial due to an unexpected illness.
  • As long as investor optimism over easy fiscal and monetary policy continues, stocks can stay elevated for some time, but a significantly delayed economic recovery due to the persistence of COVID-19 could put a serious dent in that optimism, according to the IMF.
  • Visit Business Insider’s homepage for more stories.

The COVID-19 pandemic and its associated economic decline led to a sizable stock market correction that was stabilized thanks to extraordinary fiscal and monetary policy measures from governments around the world.

But there’s a real financial disconnect between the stock market and the economy, and while the disconnect could narrow if a swift and sustainable economic recovery materializes, the opposite could happen if the economic recovery is delayed due to it taking longer to get COVID-19 under control, the IMF warned on Tuesday.

“As long as investors believe that markets will continue to benefit from policy support, asset valuations may stay elevated for some time. Nonetheless, and especially if the economic recovery is delayed, there is a risk of a sharp adjustment in asset prices or periodic bouts of volatility,” the IMF said. 

Easy monetary policies like low interest rates and the buying of distressed assets, combined with fiscal stimulus, helped maintain the flow

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Next Coronavirus Market Correction: Where to Invest $5,000

Next Coronavirus Market Correction: Where to Invest $5,000

Luxury jewelry maker Tiffany & Co. has never held a sale in its corporate history. Demand for the company’s premium wares and the iconic little blue box has been enough to maintain high prices — and profit margins — for almost 200 years.



a close up of a newspaper: Next Coronavirus Market Correction: Where to Invest $5,000


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Next Coronavirus Market Correction: Where to Invest $5,000

Similarly, great companies rarely go on sale. But unlike luxury jewelry, their stock prices sometimes fall in concert with the overall market. As traders indiscriminately sell to avoid further losses, they sacrifice ownership stakes in wonderful businesses for the comfort of cash. If you are an investor with a multiyear time horizon, this is the perfect time to buy stock in the most outstanding companies.



a close up of a newspaper: Clips from newspaper headlines about coronavirus, COVID-19, panic, crisis, virus worries, and more, atop a pile of $100 bills


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Clips from newspaper headlines about coronavirus, COVID-19, panic, crisis, virus worries, and more, atop a pile of $100 bills

A good way to identify these resilient businesses is to look for consistent sales growth and strong market position. Companies with these attributes tend to strengthen during weak economic environments; they invest in new products, hire the best people away from competitors, and build stronger relationships with customers. The next time the market has a big drop, and the best companies are being sold along with weaker ones, these three healthcare-related companies should be great bargains.

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1. Intuitive Surgical

Although the pandemic-induced reduction in elective procedures led to a 22% fall in sales in the most recently reported quarter, Intuitive Surgical (NASDAQ: ISRG) has consistently grown revenue and expanded the list of procedures available for its robot-assisted surgeries over the past decade. It’s done this in a time of historic uncertainty in healthcare regulation and rapid consolidation in hospital systems — both issues that would seem likely to make customers balk at spending millions

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