A year after the coronavirus outbreak nearly shut down the global economy, stock markets have made a massive comeback in ways that no one could have predicted. On Monday 26 April, the market achieved yet another big milestone, with stocks on Wall Street reaching record highs.
But what does the future hold, and what can investors learn from Wall Street’s performance? We take a look.
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What effect has the pandemic had on the stock markets?
The coronavirus outbreak led to some of the most dramatic crashes in stock market history. Fears about the impact of the virus on the economy, for example, saw shares in the S&P 500 drop 34% to a low of 2,237 points in March 2020.
Another index, the Dow Jones Industrial Average, plunged 6,400 points, equivalent to 26%.
Here in the UK, the FTSE 100 was not spared. The index fell to a low of 4,993.89 points in March 2020 (from 7,403.92 points in late February).
Since then, the markets have rallied, with many recouping most of their pandemic losses. For example, just recently, the FTSE 100 soared past 7,000 points for the first time since before the pandemic.
However, it’s Wall Street that is making the biggest gains.
Record highs on Wall Street: what’s happened?
On Monday 26 April, the S&P 500 rose by 0.2% to close at a new record high of 4,187.62 points.
Another Wall Street index, the Nasdaq Composite, climbed 0.9% to 14,138.78, pushing the index to a record high since early February.
The Dow Jones, however, closed slightly lower, after losing 61.92 points, or 0.2%.
These Wall Street gains come in a week bound to be the busiest for earnings so far this season.
Out of the 500 companies that make up the S&P 500 index,181 are expected to report their financials during this week.
Ten of the 30 companies in the Dow Jones are also expected to make public their financial results before the week is out.
What does the future hold?
There is much to be optimistic about from an investment standpoint.
With ongoing roll-out of Covid-19 vaccines and massive government financial support, the outlook for the global economy is much brighter.
If current progress is maintained, there is no reason why stock markets around the world should not continue making gains.
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What can investors learn from record highs on Wall Street?
New record highs on Wall Street, and indeed the resurgence of global stock markets in general, serves as a reminder of the stock market’s resilience.
The rally since the lows of March last year shows why it’s important for investors to manage their emotions during times of crisis.
While factors such as an unprecedented global pandemic can cause downward swings in the stock market, it invariably bounces back.
History has shown that the most dependable way to create wealth through stock investing is by adopting a long-term approach. That means buying and holding high-quality stock for the long haul.
If you’re completely new to the concept of investing, it could be a good idea to take a look at our investment guide for beginners.
And if you’re already familiar with the concept and are ready to get started, we’ve compared some of the leading providers of share dealing accounts in the UK to help you.
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