The Financial markets reacted with frightening falls after Covid went around the world in March 2020. They rebounded on the belief that the post-pandemic recovery was coming. But what are they doing now that the recovery is here?
At Continuum, we are looking at the answers and at what they might mean for your money.
What do we know?
The financial effects of the pandemic are many and varied. The lockdown has caused major problems for many businesses and the government support required to keep entire sectors afloat has meant a huge tax deficit for the exchequer. On the global stage, zero or negative rates and quantitative easing make borrowing easy and cash savings unrewarding.
It sounds like a perfect recipe for inflation. The tendency of central banks around the world to print money to overcome the problems of their economies may make it inevitable.
The news is not all bad. The government’s efforts to keep the economy turning over are paying off. It looks as though pent-up demand is creating a faster recovery than most people had predicted.
On the other hand, there may be stumbling blocks, such as when a new Covid variant is discovered or when there are ominous rumblings from OPEC which affect the price of oil.
The markets are already preparing accordingly.
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How do the markets predict the future?
No one has a functioning crystal ball and as Covid showed, the future cannot be predicted. However, markets can call on what may be the next best thing, which is the collective wisdom of huge numbers of people with their minds focussed by the objective of making a profit.
Equity markets fell last year, but traders were preparing for recovery almost from the minute that prices dropped. Whether the traders were seeing the future or creating it with their actions is debatable – but the results are the same. So, just as markets priced in the recovery before it actually happened, they are already trying to price in whatever comes next.
There may be some developments that the market is preparing for now. For example, recovery usually means growth in commodities as businesses need more raw materials. The current recovery has been no different. However, the market growth may affect some demand for example for grain and the demand for oil may rise. It may be that with worries about a new wave of Covid the market believes that the recovery may plateau, at least for a while.
How to get the market wisdom working for you
Being able to share the view of investment professionals might be the best way of potentially judging what the future holds for the rest of us.
But if you are not a dedicated watcher of financial markets, it can be difficult to fathom their workings, or the views of those who spend their days glued to trading screens.
Fortunately, you can get the collective view of the stock market and how this may be able to work for yourself without being an investment expert.
Expert personal advice is vital when you are planning investments. To get our experts working for you, call us now.
Your own investment strategy should always be based on your own circumstances and objectives. Getting the support of an investment expert who can provide personalised advice may be vital and the simplest way to secure it is to call us at Continuum.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
The value of investments can fall as well as rise and you may get back less than you invested.
When investing your capital is at risk.