How to invest during crisis and recession

The law provides for numerous safeguards to protect the proper functioning of the financial market. In fact, several global institutions monitor to ensure that the information disseminated in the financial markets is correct and constantly monitors to identify hypotheses of market abuse (manipulation and insider trading). The Authority then exercises the powers provided for by the law aimed at ensuring that the negotiations take place in a transparent and orderly manner: for example, in the cases provided for by the law, it can suspend and exclude financial instruments from the negotiations if facts capable of disturbing exchanges.

These Authorities also ensures that the managers of the trading infrastructures (for example, the stock market management companies) have adequate systems to manage market fluctuations (so-called circuit breakers, i.e. mechanisms for the automatic suspension of trading).

Finally, in particular conditions, such as during the Covid-19 crisis, and in coordination with the competent European Authority, the Institutes can adopt restrictive measures on certain types of operations on the markets (so-called short selling ban). Despite the numerous safeguards and although the bearish phases are physiological, it is normal that in times of crisis, conditions of uncertainty are created that confuse market participants. Small investors, in particular, can make hasty and inappropriate choices with respect to their personal situation driven by the fear of losing all or part of the savings invested in financial instruments and products, whose market value can fluctuate frequently and even fall below of the purchase price.

That’s why it is important to know what happens to the financial markets during a crisis and what psychological and behavioral factors can negatively influence investment decisions so that you can make informed choices even in difficult times. The Covid-19 pandemic has triggered a crisis whose impact on the financial markets re-proposes, albeit to an amplified extent, what happened in the case of previous epidemics - SARS in 2003, influenza swine in 2009, MERSin 2012 - as well as in other periods of crisis that have occurred in history. The spread of the virus globally and the contagion containment measures, implemented more or less incisively in the affected countries, have caused an increase in the volatility of financial markets and a decrease in the value of numerous financial assets, in the wake of a strong worsening of the global economic outlook.