Ilja Laursas. The second wave of COVID-19 - what does it mean for business and investors?
Obviously, we are now living in a scenario of a second wave of crisis. Economists say the recovery will take four years instead of two, and projected inflation is the price that people will eventually pay for a temporary solution with state subsidies.
What impact does it make on business and investors? In anticipation of inflation, investors choose non-monetary asset classes: from stocks and funds to real estate. The interesting thing is that in a normal economic crisis, people choose to save money rather than invest in other classes of assets.
Both America and Europe have decided to fight the crisis by printing money - by providing subsidies to businesses. In the short run, the economy takes advantages from it, but such actions ultimately will lead to inflation. Money and savings lose their value, whilst prices go up.
The reason is simple - the money is liquid and can be saved at home. However, it should be noted that when we talk about inflation, cash or monetary instruments turn out to be like hot potatoes, we don’t want to keep them, so we need to put them somewhere
As a result, investor interest is growing. Of course, it is also influenced by the fact that people didn’t travel in the summer, they had a limited number of entertainments and thus saved the money they can invest. We see that the demand for investment products in Lithuania has increased.