These days, traders only seem to be speaking about crypto, gold, and oil. Gone are the days when currency and index trading were the bread and butter of the financial world. But that doesn’t mean indices are not offering attractive opportunities worthy of trading. Having said that, some are looking better than others.
While the Covid-19 pandemic caused sharp falls in all the major indices markets back in March 2020, some recovered considerably faster than others. Q2 European markets and traditional US stocks dumped almost 40% compared to the previous quarter, but Asian markets and the NASDAQ took a 24% hit. But why?
Nasdaq is a proxy for the tech industry since most of the biggest brands are listed there. Fortunately for Nasdaq, technology was one of the few sectors that made growth as the world turned to online solutions to the lockdown.
Other companies to benefit from movement restrictions included Amazon, Netflix, and Paypal, which also happen to be listed on the Nasdaq. Indices with more traditional companies didn’t fare so well.
The worst hit sector was by far the energy index, specifically oil companies. The global workforce found themselves stuck at home, no longer commuting each day. Flights were cancelled, airlines went bust, and the tourism industries of the world came to a grinding halt.
Indices that featured oil companies felt the pandemic pinch more than others, but pharmaceutical companies such as Johnson & Johnson, Abbott Laboratories, and AbbVie saw a rise and staved off starvation.
The London and Hong Kong exchanges are still struggling in their Covid recovery. While the pandemic continues to contribute to the sluggish performance, other factors that affected last year’s prices include sanctions on Asia and Britain’s EU exit.
Most long-term investors agree that the safest investments are indices as they comprise of a diversified portfolio of top-performing companies. As seen in 2020, that’s not a guarantee of performance, but indices do offer stability and reliability in prevailing markets.
If you’ve been looking at indices as a trading option, consider going through the list of companies and considering which ones have a future in our modern online world. From media streaming to microchips, the world clearly has need for such products and services. The indices that have those in the fold have a better chance at future gains.