Will the Stock Market Crash Again?
Investors may have hoped 2022 would evangelize a post-pandemic boom for the stock market. Yet, the year has so far been a roller coaster for shares, with prices often rising ane twenty-four hour period and then falling the next.
And so, what events are causing this volatility? And can nosotros wait the stock market to crash, fall, rise or rally in the future? Allow's explore.
How accept major stock market indexes performed in 2022?
In the UK, all major share indexes are down since the year began. The FTSE 100 is down 2.ix%, the FTSE 250 is down 12.three% and the All-Share Alphabetize is 4.7% lower than it was in January.
Meanwhile, things aren't looking any rosier in other parts of the world. Federal republic of germany's DAX 40 is 10.one% lower compared to its value when the year began. In French republic, the CAC 40 index is down viii.7% over the same period, and the American South&P 500 has lost 9.15% of its value.
How volition the stock market perform in future?
It's off-white to say that 2022 is turning out to be a very unusual year with a number of unique events unfolding around the globe. With this in heed, the issue of these events, positive or negative, is likely to have a big impact on share prices every bit the year progresses.
So, from the war in Eastern Europe to the latest jobs data, allow's take a closer look at the factors that are probable to have a big influence on your portfolio in the coming months.
1. The ongoing war in Ukraine
Russia'south invasion of Ukraine sent stocks tumbling in late February. While the war continues, there is increasing speculation that a peace deal may be agreed sooner rather than afterward.
If Russian tanks do withdraw from Ukraine, it's entirely possible that stocks volition rally. For more on this, accept a look at our commodity that explores the stocks that could soar if Russia and Ukraine concord a peace bargain.
Of course, if no deal is struck, then stocks volition almost certainly collapse further. In other words, investor fears surrounding the conflict are likely to correlate with the extent of whatever share price falls.
ii. How the world emerges from Covid-19
Due to the state of war in Ukraine understandably hogging the headlines in contempo weeks, you lot'd be forgiven for thinking that the Covid-xix pandemic is old news. Yet cases in the Great britain remain very high right now. Over 76,000 new cases were reported on Wednesday sixteen March lone.
And then, while the government is pressing ahead with its 'living with Covid' plan – with all travel rules due to exist scrapped on Fri – the pandemic is clearly notwithstanding impacting guild. With this in listen, investors may wish to go on a shut eye on case numbers and keep in heed the risk of new variants emerging.
While lockdowns are frequently the concluding resort, there are fears that if the number of cases accelerates, then this could overwhelm the NHS, which could atomic number 82 to the UK economy shitting downward once again. If this happens again, and then wait stock prices to fall.
Withal, if the world demonstrates that it is finally ready to live with Covid, and cases begin to autumn on a global calibration, then it's entirely possible this could push button stocks towards a new bull market.
3. The time to come inflation charge per unit
Inflation, both in the UK and around the world, is running high right now. Some may wish to blame the UK's soaring inflation rate on stimulus schemes that were implemented during the pandemic. For example, the government borrowed £lxx billion to finance its furlough programme.
Whatever your opinion on this, now that such schemes have ended, plus the declaration that the Bank of England is cutting back on its quantitative easing program, there'south every hazard that inflation could autumn in future. If this happens, so nosotros tin wait stocks to caput upwards. One of the benefits of a lower inflation rate is the fact that it can requite businesses the confidence to expand.
On the flip side, if inflation continues to soar, then this will add to the economic uncertainty. In such circumstances, stocks are likely to fall. Importantly, if inflation becomes uncontrollable, then a stock market crash tin't be ruled out either.
iv. Jobs data
On Tuesday xv March, the ONS released its latest Labour Market Overview study. It revealed that the United kingdom of great britain and northern ireland employment rate rose by 0.1% from November 2021 to January 2022. Following the release of the report, markets soared, suggesting the figures were amend than expected.
The ONS releases its next report on 12 April. Should it pigment a like picture, and so it'due south likely stocks volition rise. However, a fall in employment could accept the opposite impact.
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