The stock market has been volatile since the beginning of the pandemic, and the recent correction, seeing a 10% dip across the board, has had investors wondering whether a V-bottom is now in place.
Indeed, the most recent data from the market indicates that the V-bottom may be in place. The S&P 500, Dow Jones Industrial Average, and NASDAQ have all seen strong gains since the lows of the correction, and bitcoin prices have returned to pre-correction levels.
The 10% correction across these major indices was a sign of fear among investors that the coronavirus would cause long-term damage to the global economy. However, since then, many tech stocks have shown signs of momentum, with markets posting strong gains in excess of 8%. The V-shaped recovery is certainly encouraging and it has encouraged investors to take a second look at stocks that they may have been avoiding in the past.
One factor that could be driving the V-shaped recovery is the continued strength of the US dollar. Despite the US’s weakened economy due to the pandemic, the country’s strong currency has been a source of strength in the market. Moreover, the Federal Reserve’s emergency measures to support the economy have created a feeling of confidence among investors as well.
The outlook for the stock market over the long-term is unclear but for now, the V-bottom does appear in place, with many investors showing newfound optimism as a result. If the economic outlook continues to improve, the stock market could continue to trend upward. However, there are still plenty of external factors beyond the US’s control that could throw the market into further volatility, such as the Brexit situation or increased tensions between the US and China. For these reasons, investors should continue to remain vigilant and cautious when investing in the stock market.