The recent WEF (World Economic Forum) meeting took place in Davos, Switzerland, amid an international economy that is in a state of transition and intense stress. What were some of the topics on the table at Davos, and how do other recent developments affect traders? It’s essential to note that even in the worst of times, there can be exceptional opportunities for those who know where to look.
Wars, inflation, health pandemics, supply-chain crises, recessions, shortages of consumer goods, and other factors often cause significant price movement in stocks, cryptocurrency, and other exchange assets. As every investor knows, there are potential profits in making accurate predictions about the direction of price moves, whether up or down. The best way to assess the 2022 trading opportunities and risks is to review the big picture of recent developments, scan the major indices’ charts, and examine some of the central issues in play. That means taking a closer look at COVID vaccines, the chance of a recession, day trading, commodities, and using CFDs as a way to play the markets.
Overall Outlook
From late March until mid-May, nearly all the large international stock indices fell steadily, coming very close to crossing numerical barriers that would have defined a bear market. Traders and investors who follow worldwide trends on Avatrade, know how quickly forex, equities, commodities, and other asset classes can respond to major economic news and events. However, many short-term trading enthusiasts have no vested interest in whether the prices of stocks rise or fall. Instead, they want to gather enough information to determine which direction the values will go.
For so many scalpers and day traders, the entire concept of earning a profit is related to making accurate predictions, not about owning shares that appreciate in value. That’s one reason short-term trading has not let up even in the face of a major downturn in international equities prices. At the Davos summit, for instance, many of the speakers expressed their views that a global recession, if there is one, might not happen this year. If production levels drop worldwide, or at least in the biggest producer economies, the post-COVID uptick in production could help delay the effects of a declining output for at least 12 months.
What’s Happening with Day and Swing Traders?
Social, automated, and copy trading have made an indelible and permanent mark on the retail trading communities. Nowadays, because it’s so easy to buy and sell securities from a mobile phone, tablet, or other device, millions of everyday working people are getting involved in the markets. If there is a recession in late 2022 or early 2023, would a bear market dissuade many of those newcomers from continuing to take part in active trading? Probably not, and recent history is the reason. Apparently, during the past months of corporate earnings and stock price drops, the retail side of the investing and trading universe has not suffered a bit. In fact, many of the larger, reputable online brokerage firms report an upsurge in new accounts.
Drug Companies and COVID Vaccines
What’s happening to the drug companies? During the height of the COVID pandemic, they were among the few bright spots on the major indices, posting huge gains as a result of vaccine sales to governments. Now that the golden calf has departed and vaccine product revenues have tapered off, at least two pharmaceutical companies have returned to pre-COVID normalcy. What companies might be the leaders during a future recession? If today’s situation is any indicator, it could be energy producers and food suppliers. During the first months of the year, energy prices began to hit record highs, and food shortages are beginning to strike many grocery chains. As 2022 comes to a close, investors should pay close attention to how oil and gas companies perform. Additionally, any corporation that services the wholesale grocery market could be uniquely positioned for growth. Food processors could be in the same position.
CFDs for Bear or Bull Markets
There’s a lesson in the rise of popularity of CFDs (contracts for difference). The simple vehicles allow new and experienced traders to take positions in a variety of classes without owning the underlying asset. Profits and losses are directly related to how accurately the contract holder predicts price direction, up or down. As indices like the S&P 500, FTSE, and DAX begin to post long-term losses, CFD traders have the luxury of merely adjusting their guesses in a generally downward direction. Unlike taking ownership of stocks, cryptocurrency, or commodities, owning a CFD means having the ability to go short or long on any given transaction.
