Stock market junkies probably saw this coming, but the FTSE 100 jumped higher today as traders returned from the Easter break.
The FTSE 100’s positive progress
While some investors were huddled around their barbecues yesterday, warming themselves in the blizzard, others would have been watching US shares. And Monday was a good day across the pond — both the Dow and the S&P 500 touched new highs.
The Footsie is up about 1.5% — or around 100 points — as I write. In the scheme of things, that’s not earth-shattering news. But it’s positive progress. And at 6,875, the index is within a whisker of its highest 2021 level, around 6,900, set in early January.
The climb-back from the Covid-induced dip of 2020 continues. Although long-term index-tracking investors will have to wait a bit longer to make capital ‘breakeven’. That’s because the FTSE 100 was trading around 7,500 just before the pandemic.
But reinvested dividends will have helped returns for those who selected the accumulation version of their tracker fund. Those with the income version will likely have found some consolation from dividend payments in the hand.
The big ‘win’ for index-tracking investors is the way pound-cost-averaging can help to mitigate the effect of big reversals. Regular investments into an index tracker every month can really juice up future returns when the stock market dips.
All through last year, index-tracking regular investors were getting more for their money with each monthly investment. And now the index is climbing again that benefit will be starting to show up as extra gains in investors’ trading accounts.
Pandemic news flow is driving the recovery
Of course, pound-cost-averaging works well for other funds and shares as well as for the FTSE 100. And I reckon the technique is one of the keys for ensuring a positive outcome from a long-term investment strategy. However, equities do carry risk.
And standard advice across the finance industry is to warn that share prices can go down as well as up. And investors might not get back as much as they put into shares and share-based investments. But I suspect many investors don’t need to be reminded of the risks after 2020 and its ‘black swan’ pandemic!
And I reckon pandemic news is driving gains in stock markets now. In the UK, the prime minister appeared on the telly on Monday to tell the nation the ‘roadmap’ to easing restrictions in England is still good. It’s no secret the vaccination programme in the UK is a rip-roaring success.
But I reckon the solid progress abroad with vaccinations is what’s really stoking up the markets. What’s needed is a vaccinated world to really get back to normal and news flow over the extended weekend delivered more evidence that the global vaccination rollout is gaining traction.
Rising stock markets make sense when we consider that shares aim to predict improved trading ahead for underlying businesses. And I’m bullish for the rest of 2021 and for the rest of the decade and beyond.
My belief is the pandemic has caused a lot of things to reset and adjust. And the world could be poised for better trading and economics ahead. I expect stock markets to fully reflect ongoing progress. So I’m a buyer of shares, funds and trackers right now and for the foreseeable future.