The start of December has seen the stock market make significant gains, motivated by strong investor sentiment and a shift towards higher-risk assets. This has set a strong foundation for the rest of the year, with stock markets across the globe likely to finish December with a gain.
It has been an unusual year, even by 2020’s standards. Much of the world went into lockdown in March, but the market was unfazed. Instead, investors capitalized on low interest rates and the trillions of dollars in stimulus supports and bought up riskier assets. This investment spree pushed global equity indices to new all-time highs.
The market’s resilience surprised many analysts. Analysts commented on the market’s resilience with many expecting a sharp pullback as uncertainty from the pandemic, the US election, and Brexit persisted. The markets, however, completely disregarded these fears and continued to remain supported on a wave of optimism of a vaccine breakthrough.
The effects of the vaccine news have been felt most in the tech sector, which bounced back from a brief lull in November following the contentious elections. With tech companies at the forefront of the global pandemic, their investment outlook is expected to remain strong by equities markets.
This backdrop bodes well for December and the rest of the year as well. We are likely to see more appreciation of tech stocks as the year-end approaches, and strong risk appetite amongst investors should bolster global equity markets to achieve new higher prices.
Plus, corporate earnings, which have already come in strong earlier in the year, should continue to come in above expectation as well. This coupled with the abundance of stimulus measures should prevent any major market corrections.
It is worth noting, however, that the market’s bullish behavior from this point onwards may be different from earlier this year. With most of the risk already priced in, stock markets may move then more cautiously going forward.
Overall, even with any dips and corrections for technical reasons, and the continued uncertainty from the coronavirus crisis, the stock market is still expected to be in a positive position going into the New Year.