This week I’m focusing on three prominent indices that could see a crash or correction this year. A crash or correction if the perfect opportunity to explore growth stocks. It is impossible to say when a crash or correction will take place but there are indications it could be on the horizon. Here I explore three in particular.
Since the crash in March 2020 caused by the onset of the pandemic, the UK100 has risen by about 30% thanks to increasing investor confidence, market optimism, vaccination rollout and rapid growth for some industries, though not all.
Since the stock market crash in March 2020, financial services, defence, and travel stocks have yet to recover from their decline and are continuing to trade at lower than they did before the crash. Before this, at the beginning of this month, the UK100 and other indices started falling, indicating a potential correction. While problematic for various reasons, this dip in the market could signal the entry point for buyers looking for long-term gain in healthy and robust UK companies. As supply issues cause friction with the vaccination rollout, the purchasing of white goods, exercise equipment and groceries have seen many companies thrive and whose industries could prove a safe entry point.
Dissimilar to the China A50 (which is an avenue for foreign investors to access the Chinese onshore stock market), the China50 includes both overseas and mainland investment options.
While starting the Western year on a high, the turn of the lunar new year saw Chinese markets falter amid worry grow around rising Treasury yields, overvalued tech stocks, inflation and negative investor sentiment. During the height of the pandemic, in 2020, China was one of few countries to report positive growth. However, since the beginning of 2021, many blue-chip companies have plunged after a period of monetary tightening in which the People’s Bank of China soaked up 260 billion yuan of liquidity from the financial system. With monetary and policy tightening comes growth discontinuation, which could cause a possible price correction for the China50. If so, this could be the perfect price point for investors to foray into the Chinese market.
The beginning of the week saw big selloffs for portions of the Nasdaq as attention turned towards cyclical stocks, which typically perform best during points of expansion, and falter during periods of recession and contraction. Between late March 2020 and early February 2021, the Nasdaq 100 index made bullish gains of 107%. Are we due to see a correction from the popular US index soon as expected?
Earlier this month the House approved President Biden’s $1.9 trillion stimulus package. The package includes $1,400 stimulus checks for individuals, unemployment insurance of $400 and an expansion of child tax credit. To boost the economy, $130 billion will be allocated to schools, $160 billion for Covid testing and vaccinations, $7 billion for small businesses and $350 billion for state and local governments. The new President’s fiscal stimulus plan is expected to jolt the US economy back to life over the next few months, spelling growth across many sections and markets.