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2020’s volatile financial markets encouraged a generation of new investors

2020 was a year that no-one could have predicted. What started like any other year, quickie devolved into one of the most tumultuous and unexpected years in history. The pandemic had a global impact on economies, businesses, and of course the financial markets.

Source: Pexels

Impact on stocks

The pandemic had a short, but undeniably sharp impact on the world’s stock markets. In March of last year, the stock markets around the world dropped some 30% making it the worst first quarter in history, according to CNBC. This was caused by a range of factors including unemployment, the financial struggles of companies, currency devaluation, and the knock-on effect of the behavior of other markets.

Many large publicly traded companies struggled with supply chain issues, particularly with Chinese and Asian companies that were impacted by the virus. Issues relating to lockdowns, less spending power from the public, and furlough schemes also harmed the world’s stock markets.

Impact on forex

The world’s currencies experienced significant peaks and troughs during 2020, mainly linked to their ability in controlling the pandemic. Initially, the foreign exchange markets were not impacted but as the outbreak began to impact global trade, currencies such as the GBP, EUR, and USD reacted. The GBP was even more vulnerable due to ongoing issues with Brexit and confusion over what kind of deal, if any, would be struck between the UK and EU.

The pandemic also had a big impact on the EUR as the bloc relies on and is heavily involved in global trade, as well as having big ties with China. Italy, which was the first big nation to go into full lockdown and which suffered severely from the virus, led to uncertainty and fear around investments in the region.

Source: Pexels

During Q1 and Q2, the USD remained relatively unscathed, but as cases rose and the US elections loomed, the dollar took quite a hit. While it did outperform most other currencies throughout the year, the currency was ultimately impacted too.

Impact on commodities

The commodities market did not escape unscathed during the last year. 2020 was the first time in history that the value of oil went into the negative. A reduction in manufacturing, travel, and other activities significantly decreased the oil demand. Agreements were made to cut oil production, but Russia refused to comply. Then, Saudi Arabia announced it would increase production and sell barrels at a discounted rate of around $7 per barrel. In April, the value of crude oil became negative for the first time in history.

As a contrast, the value of gold increased and reached a record high of almost $2,000 an ounce in July of 2020. It rose some 28% during the year and analysts at Forbes believe its value could continue to increase during 2021.

A new generation of investors

2020 was a year that saw a big uptick in the number of investors signing up to trading platforms. Some of the leading online brokers saw a surge in new accounts during Q1 and Q2, representing new investors who have more time on their hands and also want to leverage the movement in various financial sectors. Amateur and curious investors flocked to trading sites including those such as Trade360 as well as their social media pages to interact with their communities. Brokers such as this offer the trading of CFDs, currency pairs, stocks, indices, and commodities.

Many investors sought to speculate on price movements of currencies, stocks, and commodities, such as the ones mentioned above. This was advantageous during a year like 2020 because it didn’t mean buying the underlying asset. Rather, traders invested in price changes, either negative or positive, meaning that the year’s increased volatility was a bonus.

As for the next 12 months? Hopes are high that economies and markets will show signs of recovery. There are still expected to be moments of volatility across the board due in part to several upcoming elections, the roll-out of the vaccine, and the progression of the pandemic. This is expected to continue driving amateur and beginner investors to try their luck at trading.

 

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