Cryptocurrencies tumble, with bitcoin falling 8% and ether down 9% in the last 24 hours
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The year has seen record highs for US, Japanese, European and UK stock markets, among others. How should investors and traders react? Source: Getty Images Shares Stock market Stock United States Investor Investment Written by: Chris Beauchamp | Chief Market Analyst, London Publication date: Monday 20 May 2024 13:36 While many investors may feel nervous about the potential for a fall, historical analysis shows that investing when the stock market is at an all-time high can actually be a profitable strategy in the medium to long-term. The US stock market hits new all-time highs more frequently than one might expect, with new records being set in 30% of months since 1926. On average, 12-month returns following an all-time high have been 10.3% above inflation, better than the 8.6% for periods not at new highs. No need to fear new highs The impact of avoiding the market after new highs can be severely detrimental to long-term wealth creation. Data from Schroders shows that a $100 investment in the US stock market in January 1926 would be worth $85,008 by the end of 2023 in inflation-adjusted terms, representing a 7.1% annualised return. However, a strategy that switched to cash whenever the market hit a new high would have resulted in a much lower terminal value of just $8,790 – 90% less. Short-term picture more mixed No investing strategy works 100% of the time. New highs are often followed up by other record highs, but pullbacks are a feature, not a bug, of even the strongest market rallies. Some are short-lived, such as the recent April pullback in US indices, but others can go on for much longer. If a trader’s horizon is more short-term, then it is prudent to make sure they are following the price trend in their chosen timeline, but also the longer-term trend. All-time highs not a reason to turn bearish While feelings of nervousness are normal when stock markets reach unprecedented levels, historical data clearly demonstrates that there is no rational reason to fear investing during periods of all-time highs. The market setting new record levels should not, in itself, deter investors from participating in equity markets. Other valid considerations may exist, but the all-time high level alone is not a justifiable reason to dislike stocks. This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary. -
FTSE 100, DAX 40 and S&P 500 head back towards record highs Outlook on FTSE 100, DAX 40 and S&P 500 amid BoE and Fed talk. Source: Getty Images Written by: Axel Rudolph FSTA | Senior Financial Analyst, London Publication date: Monday 20 May 2024 13:38 FTSE 100 tries to reach last week’s record highs The FTSE 100 is gunning for last week’s record high at 8,479 with the psychological 8,500 mark remaining in sight as several Bank of England (BoE) members will be speaking in the course of this week. Upside pressure will be maintained while last week’s low at 8,393 underpins on a daily chart closing basis. Source: ProRealTime DAX 40 consolidates below record high Last week the DAX 40 hit a record high close to the minor psychological 19,000 mark before slipping and forming a bearish engulfing pattern on the daily candlestick chart which was followed by a drop to Friday’s low at 18,627. This increased the likelihood of at least a short-term bearish reversal being seen over the coming days, even though on Monday a minor recovery rally is currently taking place. Since last week’s high hasn’t been accompanied by a higher reading of the daily Relative Strength Index (RSI), negative divergence can be seen. It may lead to a several hundred points sell-off taking the index back to its April-to-May uptrend line at 18,464. For this scenario to become more probable a fall through last week’s low at 18,623 would need to be seen, though. Source: ProRealTime S&P 500 eyes last week’s record high The S&P 500’s rally from its early May low has taken it to last week’s record high at 5,326 before pausing amid Fed comments making it clear that the battle against inflation hasn’t been won yet. Further Fed commentary by several voting members is in the pipeline for Monday. The previous record high made in April at 5,274 acted as support on Friday when the S&P 500 dipped to 5,284 before heading back up again. As long as the accelerated uptrend line at 5,286 holds, upside pressure should remain in play. Were a new all-time high to be made, the 5,350 region would be in focus. Source: ProRealTime
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Gold price reaches new record high, WTI crude price and natural gas price also rally Gold has surged to a new high, and both oil and natural gas prices are rising once again. Source: Getty Images Written by: Chris Beauchamp | Chief Market Analyst, London Publication date: Monday 20 May 2024 13:26 Gold hits new record The price surged to a new record high on Monday, pushing towards $2450. Further strong buying by Asian governments and consumers continues to support the price, which formed a higher low in late April and early May. Additional upside momentum could drive the price on towards the $2500 level, the next big psychological mark. In the short-term, a close back below $2400 might indicate some consolidation is at hand. Source: ProRealTime WTI pushes above 200-day moving average Oil continues to recover, and WTI has pushed back above the 200-day simple moving average (SMA). A close above the 200-day SMA then leads the price to target trendline resistance from the April highs, and the $81.15 lows from late April. A reversal back below $79 might suggest that the price will move back to retest the recent lows. Source: ProRealTime Natural Gas surges Natural gas prices continue to make huge strides and are now rapidly closing in on the highs from mid-January. There seems to be little sign of any possible near-term reversal at present, though some consolidation after such big gains would not be surprising. Additional upside targets the 2900 and the 3000 levels, followed up by the January high at 3121. Source: ProRealTime
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