Since 2020, major stock markets around the world have shown a clear upward trend. As the COVID-19 epidemic gradually came under control and the economic situation gradually improved, the market began to pick up. However, whether this represents a real mitigation of market risk is still debated.
First of all, behind the rise in the stock market, it reflects the market’s optimism and confidence in economic recovery. Many countries have carried out large-scale stimulus plans due to the new crown epidemic, and the implementation of these plans has boosted the development of various industries. Stocks also rallied on further confidence in the future of the economy as vaccines roll out around the world.
However, the stock market rally also comes with some risks. First, there are varying degrees of inflationary pressures in countries around the world, which has many worried that the stock market is overheating. If inflation is likely to persist for an extended period, this will gradually dampen optimism in the market. Secondly, the stock price rise of many companies is out of touch with the fundamentals, and there is also a certain risk of bubbles. In addition, the Federal Reserve indicated that it may raise interest rates again, triggering interest rate hike expectations, and raising interest rates will have a negative impact on the stock market.
From this perspective, there is no necessary connection between the rise of the stock market and the mitigation of market risks. On the contrary, the rising stock market has actually brought some new risks and challenges.
In such a situation, how should investors respond? First, learn to assess the causes and sources of stock market volatility. Usually, there are more than one reasons for the stock market to rise. If you only see some of them, it is easy to form a misunderstanding of the market.TMGM
Not only that, investors also need to maintain investment prudence. When the stock market is rising, you should not be confused by the enthusiasm of the market. You need to analyze the fundamentals of individual stocks and industries in depth to judge the ratio of risk to return. At the same time, you should choose appropriate investment strategies and products according to your own risk tolerance.TradeMax Global Markets
In general, a rise in the stock market does not mean that market risks have been mitigated. Although the rise in the stock market indicates the market’s confidence in economic recovery, it will also bring new risks and challenges. While grasping the market, investors need to be aware of these risks and challenges in order to make more informed investment decisions.YSHX,Yun Shang Hui Xin,Yun Shang Hui Xin Ltd,Yun Shang Hui Xin Limited,Trademaxus,IC Markets,Tickmill,TradeMax Global Markets,Spread EX
