After more than a year of living with the coronavirus pandemic and its consequences, it’s no exaggeration to say that the crisis launched what was effectively a global economic recession. Several of the world’s biggest economies tanked rapidly, and the effects on everything from employment numbers to GDPs were profound.
Curiously enough, amidst all of this, some of the world’s biggest and most influential stock markets actually retained their strength — or at least managed to rebound swiftly. Most notably, the American markets were surging back even as the pandemic still raged in the first half of 2020. And just recently, we highlighted news of the New York Stock Exchange breaking records. For some, we can now say fairly conclusively, staying in the markets during the crisis paid off in a big way.
At the same time, however, the initial crashes in major markets — which were literally unprecedented in their severity in some cases — also caused many investors to abandon ship. At the time, it was unclear how many people were simply pulling out of financial investment altogether to wait out the pandemic and how many might have simply withdrawn from stock markets to seek alternative options. We still don’t have these answers in actual numbers or percentages. But it is clear after a little more than a year that some alternative investment markets have thrived during the pandemic.
Interestingly enough, one of the alternatives people sought out during the pandemic was still within traditional stock market settings. Last autumn, CNBC noted a move towards day trading, hoping to “chase the stock market” amidst its volatility and rebound. The same article pointed out that this was likely to be a poor strategy for most (generally speaking, day trading without experience is not advisable). Nevertheless, it highlighted a clear trend of people stuck at home, bored, and seeking a way to come by profits in an active and almost entertaining way. Thus, many others got back into the markets while many abandoned long-term stock investments to do more day-to-day trading.
There have also been reports of increased activity in the forex markets or currency exchange. Here, day trading is actually the norm, as legions of people worldwide look to capitalise on the tiny shifts and incremental differences between currency from one hour to the next. However, it is likely that some in the past year have also learned of the appeal of spread betting in the forex markets. For those who haven’t familiarised themselves with this alternative method, FXCM describes spread betting as a way for people to profit (tax-free) from the markets without ever taking ownership of assets. It essentially involves “betting” on whether a given asset will rise or fall in value over time. There are pros and cons to the method, but in light of the pandemic and market crashes, one can see the draw of being able to speculate on currency prices without having to own an asset. We’d all just witnessed countless valuable assets plummet out of the blue.
Finally, we also know that there were spikes in cryptocurrency investment during the pandemic. The rises in major cryptocurrency values that we’ve seen can be attributed in part to “whales” — big-money investors who pour large sums into digital assets. However, the BBC cited analysts who have also determined that the pandemic led to many new investors reassessing the potential of bitcoin and its counterparts. These investors have undoubtedly engaged in a combination of long-term plays and day-trading practices. Still, the bottom line is they helped the crypto market become one of the most popular alternative options during the pandemic.
What will be interesting to see as we eye better days and more economic stability ahead is whether or no activity in these alternative markets wanes. It could be that people will happily return to stock markets in more stable times. But it may also be that exposure to these other options will stick and lead to more diverse habits moving forward.