The S&P 500 Regained Its 2020 Losses

The S&P 500 Regained Its 2020 Losses

over 3 years ago2 mins

Mentioned in story

The US stock market’s key index, the S&P 500, rose above the level at which it started 2020 this week – and it’s only about 5% away from February’s record high 🔥

What does this mean?

Ever since the dramatic stock market selloff in March, investors have been encouraged by promises from major central banks and governments that they’d do whatever they could to shield companies and workers from the coronavirus pandemic. And more recently, those investors have been further emboldened by business reopenings – so much so they’ve been buying up stocks in their droves.

Daily Brief Image

But not everyone feels the same way: others think stock markets are now “priced for perfection”, and that unexpected bad news – like job losses or business insolvencies – could derail the market’s recovery 🧐 That fear’s likely been compounded by this recovery’s dependence on big tech companies, which have helped the US's tech-focused index – the Nasdaq Composite – has risen 40% from its March lows to a record high this week.

Why should I care?

Stock markets reflect what’s expected to happen in the economy before it actually does – and even then, they’re a better reflection of that economy’s biggest companies than the economy as a whole 🌐 That was driven home by the World Bank earlier this week, which now predicts the coronavirus-tanked global economy will shrink by 5.2% this year – the most since World War II, and an outcome that’ll force millions into poverty.

Some investors – like hedge funds – have positioned their investments so that if markets fall again, any losses will partly be offset by other assets using “put options” 📊 Puts give an investor the right to sell shares at a predetermined price, meaning they’ll be able to recoup some losses from the fall of the shares themselves.

A put option’s payoff is greater the more the underlying asset’s price falls
A put option’s payoff is greater the more the underlying asset’s price falls


All the daily investing news and insights you need in one subscription.

Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

/3 Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.

© Finimize Ltd. 2023. 10328011. 280 Bishopsgate, London, EC2M 4AG