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Can We Rely On Market Resiliency Against Reversals?

stock market during pandemic

Last week’s developments confirmed a continued bullish movement and that the current momentum will not be stopped just yet. With the trend of economic growth still in pursuit, many financial analysts and retail investors have now conformed to economic optimism. And while next week’s calendar is not as eventful, all eyes are set on this coming Wednesday’s Consumer Price Index (CPI) and Thursday’s Producer Price Index (PPI) to gauge the safety and potential for growth of investment instruments.

However, beyond the face value of good news and optimism, there is still cause for concern of whether current market resiliency is protection enough from sudden reversals or if naivety is getting the best of us. And so, to put things into context and prepare us for next week’s trading, we will be recounting the most noteworthy events last Friday and what other market sentiments we should be aware of in the weeks to come.

#1 Current Jobs Market Reports Show Economic Recovery

One of the best pieces of news we’ve heard these past few weeks goes to the current jobs market report that revealed 943,000 jobs were added into the economy, which isn’t only a step further from last month’s 938,000 but also a big leap in comparison to the forecast of only 870,000. As a result, we saw the Dow Jones rise by over 100 points and closing at a record high, with other indexes and indicators just falling shortly behind it.

There’s no denying that labor shortage remains a major threat that could undermine any of the progress made so far, and the current jobs market report has not only breathed a sigh of relief into the economy but also given it hope. And if job creation remains consistent for the remaining two quarters of 2021, overall economic activity is guaranteed to rise in proportion to these numbers.

#2 Tech Stocks Remain Strong On Bullish Rally

Tech stocks have been at the most advantageous position since the start of the global pandemic, and while most would expect this bullish rally to slow down or test levels of support, the bullish momentum remains strong and confident. In fact, many investors and analysts perceive these stocks as the smartest instruments to invest in, given their earnings consistency amid all the uncertainty and animosity that clouds the market.

Furthermore, while some would argue that the inevitable interest rate hikes would hit tech stocks the hardest given the pace at which inflation is becoming an even bigger problem, the growth these companies are undergoing might be capable of counterbalancing the momentum. Therefore, even if the timeline were, in theory, pushed to an earlier date, the drop won’t be as damaging as people expect it to be.

#3 U.S Economic Growth Goes Past Pre-Pandemic Levels

Last but not least, U.S economic growth has not been sitting on the sidelines and has already blown past expectations as it goes above pre-pandemic levels of economic activity. And while we are still in the middle of the Covid-19 global pandemic alongside worries of the delta variant, consumer confidence and overall spending have supported further growth and economic progress.

Likewise, we’re all well aware that when observed from the greater picture, the overall economy has yet to fully reopen and welcome everyone back to stimulate further market participation. But given the ratio at which current participation occurs in contrast to the constraints felt today, it supports the notion of economic optimism and for growth to remain consistent for the remainder of 2021.

However, Not All Investment Markets Share The Same Sentiments

Despite the positive picture we’ve managed to create regarding current economic progress, not all investment markets share the same positive sentiments and must also be accounted for to generate an accurate depiction of the overall market situation. And so, to remain unbiased and impartial with our views, it’s only natural that we also touch base with the risk of a housing crisis and the supply chain worries that remain unresolved.

  • A Housing Market Dilemma

The housing market has been on fire lately but is one decisive move away from either maintaining its current bullish run or experiencing a steep drop in prices. And given the fears of inflation and construction materials like lumber becoming more affordable, it will only be time until a dilemma unfolds. As a result, we recommend refinancing a lower fixed interest rate if possible and investing only in affordable home projects such as storage expansions and renovations.

  • Supply Chain Worries Persist

Although processing factories and warehouses have recovered considerably in contrast to the beginning of the global pandemic, the issue of getting these goods and materials to where they need to remain at large. And with supply chain worries persisting, it will only be a matter of time until current progress plateaus as a result of shortages bottleneck the flow of products.

Vigilance And Safety Above All Else

In conclusion, regardless of the good news and optimism provided last week, vigilance and safety remain our top priorities in case of a sudden shift in market sentiment. And while market resilience has proven itself effective, it never hurts to be safe during these uncertain times.

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