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The markets: A big crash – then a bigger bounceINTL

The markets: A big crash – then a bigger bounce

If you didn’t know what a margin call was before 2020, then March was a good introduction. Earlier this year the world became witness to the extreme volatility of a stock market crash as well as a strong correlation between equity markets, commodities, and other financial instruments. Major movements included the Dow Jones Industrial Average dropping 7.8% on March 9, a further drop of 10% on March 12, followed by a 12.9% drop on March 16. Almost every other market and commodity fell in tandem – and who can forget negative prices on oil futures in April?

But, the coronavirus-induced crash was unique in that the bounce-back was equally swift, with the S&P 500 reaching its pre-crash level by August. While some believe the US Federal Reserve played the major role in the recovery, others attributed it to Robinhood traders or SoftBank’s Masayoshi Son with high volumes of call options buying. Still, the market has continued to ignore the naysayers calling for a correction – will it continue its steady growth in 2021?  

why it matters
Plenty of traditional wisdom fell by the wayside in 2020, as market volatility reached all-time highs. Ultimately, it was retail investors that ‘bought the dip’ that prevailed this year, despite many experts seeing valuations as detached from reality.