It is no exaggeration to say that there truly is no place like home. This sentiment was recently expressed in one of the most extraordinary ways by the U.S. stock market, which welcomed investors home in a big way.
Since the Black Monday crash of 1987, US stocks have been on a long-term upswing. This long-term trend was briefly interrupted by the COVID-19 pandemic that resulted in a crash of U.S. markets in March of 2020. Investors around the world panicked and sold their stocks in droves as the initial shock of the pandemic wore on.
However, while some markets around the globe remain fragile, the United States stock market battened down the hatches and welcomed investors home in a remarkable way. Between the months of April and August 2020, the S&P 500 recovered a stunning 30% of its losses from the Coronavirus collapse. This was indicative of a larger trend; the rest of the U.S. stock market also rose over this time frame.
The resilience of the U.S. market could be attributed to several factors.
First, US stocks are resilient to economic changes due to their diversification. The companies listed on the major stock exchanges represent a wide variety of industries and geographical areas, which helps to reduce the impact of a single downturn.
Second, US stocks have a greater global reach than other markets. American companies are listed on major exchanges all over the world, giving them a larger audience of potential investors. This helps to keep the US stock market relatively stable in times of economic change or crisis.
Third, US stocks are backed up by effective and deft crisis management strategies. The Federal Reserve has instituted lending efforts and other initiatives over the past year that have helped to stabilize markets and reduce investor anxiety.
The U.S. stock market has welcomed investors home in a big way. It has shown resilience despite the volatility of the 2020 pandemic, and its recovery has been remarkable. As the global economy slowly recovers from the coronavirus shock, the US stock market is well-positioned to continue its long-term upswing.