The stock market volatility level witnessed in 2020 following the outbreak of the coronavirus pandemic has created some uncertainty among investors compared to the previous years. The pandemic wave is unpredictable and continues to shake the broader market, requiring investors to have determination so that they hold on to their long-term investment.
For instance, one of the oldest Dow Jones Industrial Average has logged 14 out of its 16 largest one-session points, which have gone down this year along with its nine biggest single-day point gains.
What Investors Should Expect
There have been reports that if there is going to be similar volatility in 2021, then investors should expect another stock market crash. The same reports say that it will be difficult to predict short-term market moves. However, the historical data certainty gives some hints on what investors should expect.
According to stock market history, investors should be ready for tough times ahead. They need to prepare for a downside, and this is going to affect most investment firms. According to reports on projections based on the history of the stock market, there are high chances of investors witnessing another swoon in the stock market. Seeing big investment companies such as S&P 500 experience pullbacks is a clear indication that investors should be ready to witness a sizable crash in the stock market in the year 2021.
Also, there is much more that investors will need to worry about apart from the historical data of the stock market. There are other external factors that are likely to weigh on the market in 2021. If this happens to be the case, it will make emotional investors exit from the stock market industry.
The Effects of COVID-19 Restrictions on Stock Markets
COVID-19 restrictions in major states in the U.S crashed the stock market significantly in the first wave of the pandemic.
However, with the second wave of pandemic already surging, some equity markets are yet to factor in the possibility of another shutdown in major states such as New York.
Because of the increasing infections, some states may be forced to impose tighter restrictions as measure of controlling the spread of the virus. If the states pull through with a total lockdown and other COVID-19 measures, then this is going to affect the stock market. Note that the move to lockdown states may not be a good thing for investors.