UNITED STATES—The spread of the Covid-19 virus last year crushed the markets in March 2020, as it became clear that the economic impact of the virus would be massive. Optimism around the fact that vaccines would relatively soon allow the world to return to normal quickly has supported the stock markets in the second part of 2020 and in 2021. Many indices have even reached new all-time highs (ATH) this year, such as .
Still, with all the changes observed around the world, many strategists and analysts are expecting a much more volatile economy in most countries, and this volatility will reflect itself in the stock market. But volatility isn’t necessarily all negative, as it is a great tool for active traders ready to take advantage of price changes, especially when it comes to aggressive trading styles like scalping or day trading. However, it’s essential to use a reliable and regulated online trading provider like easyMarkets to trade in a secure trading environment, and use trading features like the “Deal Cancellation” tool to protect your capital in such uncertain times.
So, are stock markets really recovering from the pandemic?
There is no doubt that the markets bounced back from the fall of March 2020, and that they’ve recovered from the pandemic – some of the major worldwide indices even recorded new ATH or came very close to doing so at the time of writing. Money went into promising sectors like the healthcare and biotech industries, as well as into stocks that allowed people to communicate, learn, work, and entertain themselves from home. With countries reopening, investors bet on “recovery-themed stocks” like the travel and leisure market, as well as the energy, financial, and industrial values.
Despite all this, many strategists believe that the stock market is overvalued, and that market participants are overly positive. Concerns about the impact of the rapid spread of variants are increasing and restrictive measures might be put into place again, slowing down global economic activity and pushing markets down. Not to mention that the positive sentiment for equities has been supported by ultra-accommodative monetary policies around the world, which of course can’t last forever. When central banks decide to taper their monetary policies, things might change for the stock market.
Another important factor of the recent recovery comes down to a new type of retail investors that appeared last year. The market crash of 2020 attracted many young retail investors wanting to take advantage of the market fall to start investing in the markets. But these investors aren’t necessarily looking to “buy and hold” – they are “embracing speculation like never before” according to Goldman Sachs.
There has undeniably been a recovery in the stock market from the pandemic, but the impressive surge in prices leads many investors and analysts to wonder how it will end, and if the rise is sustainable towards the end of 2021 and in 2022. What do you think?