As 2020 draws to a close, investors are already keen to discover what the next year could hold in store. No-one can ever predict the future of the financial markets with complete certainty. But, by taking a look at what the experts are saying about different aspects of the trading situation, we can start to get an idea of what might happen.
The Stock Market Expected to Keep on Rising
2020 saw hugely volatile stock markets, with values rising and falling several times throughout the year. CNBC surveyed a group of financial analysts about the prospects for next year, and the overwhelming consensus among them was that 2021 would be a good year for stocks. Their overall prediction was a rise in the S&P 500 of up to 22%.
In the UK, UBS Bank has suggested 7,200 points as being a reasonable, achievable target for the FTSE 100 index to reach by the time that 2021 draws to a close. This would be a 13% rise from the figures as they stood at the time of their estimate, in November 2020. This prediction is mainly based on international investors being attracted back due to recent underperformance and tempting valuations.
The FTSE index was near its record high at the start of 2020 but suffered a disappointing year after that. One issue that could greatly affect its performance in the coming year is the eventual outcome of the on-going Brexit negotiations. The type of trade deal that is finally agreed between the UK and the EU will have a massive effect on the stock market at the start of this year and beyond.
The Commodities Markets to Enter a Bull Market
A huge variety of business commodities can be traded on the financial markets, from oil and gold to sugar and rice, and many others. Prices are generally dictated by supply and demand, with issues like adverse weather and political tensions generally causing the biggest swings due to the supply of fresh products drying up.
According to the latest predictions from Goldman Sachs, 2021 could see a structural bull market forming in commodities. Their analysts put this down to years of under-investment in old economy areas like crude oil and metals. This makes the potential supply of materials relatively limited without affecting the global level of demand, pushing up prices as a result.
They also note that a growing amount of interest in the areas of new technology and emerging industries have pushed these long-established areas into the background to some extent. As always, poor weather conditions could lead to an under-supply of crops and other food commodities throughout the year, while gold continues to be a sought-after safe haven in times of turmoil.
Currency Markets Could Be Affected by Post-Brexit Trading Deals
As it is the biggest financial market on Earth, forex trading is an activity that is carried out on a huge variety of currency pairs. Among the most common pairs is GBP/USD. This pair has had many highs and lows in the last year so, with Brexit uncertainty in the UK and political uncertainty in the US among the key drivers.
With the Brexit process to finally come to an end at the start of 2021, the strength of the GBP could come down to the quality of the trade deals that are struck with the EU and other partner nations. Many analysts also suggest that there are signs of weakness in the USD against most major currencies, with some suggesting that it could lose up to 20% of its value in the next couple of years.
Despite the current political uncertainty, the fluctuations in this pair will be carefully watched by thousands. In the UK, approximately 280,000 people trade forex, which, is a doubling of the amount since 2004. This could be due, in part, to what a top-rated forex broker site reflects, which is that absolutely no specialist knowledge of business or industry is needed to trade in this market. They point out that some basic information on the current state of the world’s current economic climate is all that is needed to get started. Additionally, this site credits the accessibility and flexibility inherent in forex trading for its popularity.
Indeed, forex trading is predicted to be one of the key trades for 2021, with experts making predictions and current traders choosing their analytical strategies. Although, it seems certain that 2021 will throw up a few economic surprises as any other year does. However, by taking account of what the experts are saying you should find it easier to get a reasonable idea of what to expect in the next 12 months.