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Friday, December 3, 2021

Economic recovery from Covid effect on stock markets 

You would never guess how bad last year was for many people in the world by just looking at Wall Street, or any other big stock markets for that matter. Major indices have spiked since markets fell in March 2020, as Covid-19 spread across the globe. As millions of lives were lost, and as tens of millions of people couldn’t keep their jobs, and as global economic growth was truly shaken because of so many uncertainties, the stock market soared so much that it reached new highs in 2021. This upward movement has been mostly triggered by unconventional monetary policies adopted around the world, widening the gap between Wall Street and Main Street, as well as inconceivably optimistic investors. 

But as the markets quickly recovered from their drop in March 2020, many investors are wondering if it truly means that an economic recovery from Covid is on the way, or if markets are simply speculating. There is no doubt that with vaccines being distributed around the world and the falling number of actives cases and deaths, economic growth prospects are improving. This “healthier-looking situation” is helping the world’s biggest nations ease their restrictive measures previously adopted to slow the spread of the coronavirus as summer approaches. This supports investment, spending, and consumption from retails, companies, as well as governments, which are all important components of the GDP that measures economic growth. 

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Even with more promising and growth perspectives, investors find it more difficult to generate returns than during the precarious state of the world in 2020. And the situation illustrates just how much equity returns do not always align with the actual state of a given economy.  

As Andrew Slimmon at Morgan Stanley Investment Management declared, 2021 might perform well because the second year of a bull run has historically been positive. However, the stock market has been more volatile this year, so investors should expect more wild price movements in 2021.  

“Stocks this year may resemble their performance in 2010, i.e., year two of the bull market that started in 2009. After the S&P 500 Index’s stunning 68% return from the March 2020 low to the end of the year, stocks likely need to take a breather, much as they did in the second quarter of 2010. Importantly, however, overall returns of a second year of a bull market are historically positive, like in 2010,” he added. 

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While the global economy is bouncing back, recovery is still choppy, which means that there are still some uncertainties about how well the global economy will perform this year, and if we’re done with this virus or if economies are going to take another hit later on this year. 

This uncertainty is likely to trigger significant price fluctuation, which traders can take advantage of with platforms like easyMarkets. Online brokers such as this provide a way to potentially profit from volatility regardless of market direction, via contracts for difference (CFDs). Long-running platform easyMarkets is an example of a regulated provider with robust trading conditions such as no slippage and fixed spreads. Alongside this are proprietary tools including dealCancellation, which allows clients to undo losing trades within 1, 3 or 6 hours for a small fee and subject to terms. These risk management tools help traders to better navigate the choppy waters of market volatility.  

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